Objective - One of the bank's main goals is to obtain profit mainly from the intermediation process. The implementation of the Indonesian banking intermediary function in the year 2017 is not optimal, as indicated by credit growth in the year 2017 which only reached 8,35%. This phenomenon also occurs in the 10 largest banks in Indonesia. In 2017 the intermediation function has decreased but profits have increased. The aim of this study is to analyze the influence of banking intermediation on profit growth and whether credit quality and operational efficiency affect profit growth. An indicator of banking intermediation is a loan to deposits ratio (LDR), credit quality with non-performing loans (NPLs), the operating efficiency with the ratio of operating expense to operating income (OEOI) and profit growth is measured by the amount of profit.

Methodology – Descriptive and verification methods will be used in this study, with data from the 10 largest banks financial statements in Indonesia for the period 2016-2017 while data analysis uses multiple linear regression.

Findings – The findings of this study show that partially LDR has a positive effect although the effect is not significant on Profit; NPLs have a negative effect on Profit and the effect is significant; OEOI has a negative effect even though the effect is not significant on Profit; Simultaneously, the variable LDR, NPLs, OEOI have a significant effect on profit.

Novelty – Compared to previous studies, bank profit growth is not only influenced by banking intermediation, but if banks can maintain credit quality and improve operational efficiency, bank profits will grow

Type of Paper - Empirical.

Keywords: loan to deposit ratio, non-performing loans, the ratio of operating expenses to operating income, profit growth.

JEL Classification: G21, G32.

URI: http://gatrenterprise.com/GATRJournals/JFBR/vol5.1_2.html

DOI: https://doi.org/10.35609/jfbr.2020.5.1(2)

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