Determinant of Indonesian islamic and conventional banks' profitability

This study aims to investigate the prominent determinants of Islamic and conventional banks' profitability. The independent variables are bank size, loan, credit risk, and stability (measured by z-score). The profitability was measured by return on assets. The analysis of data was on annual data of Islamic banks (Islamic commercial banks and sharia business unit of conventional banks) and traditional commercial banks during the period 2014-2016. The statistical description showed that the profitability and loan of the sharia business unit are higher than Islamic and conventional commercial banks. Islamic commercial banks have the highest credit risk. Traditional commercial banks are more stable than Islamic banks. The regression test results found that credit risk and z-score have a significant and robust relationship with the profitability of Islamic and conventional banks. The higher z-score and lower credit risk will increase profitability. The bank size and loan variable do not affect the profitability of conventional banks. But vice versa, the bank size has a positive and significant relationship with the profitability of Islamic commercial banks and negative relationships with the sharia business unit profitability. Likewise, the loan variable has a negative and significant relationship with the profitability of Islamic commercial banks and a positive relationship with the sharia business unit profitability. It can be explained that the profitability of Islamic banks is influenced by all of the independent variables. While conventional bank profitability is only affected by two variables. Thus, it can be concluded that only stability and credit risk variable plays a vital role in increasing the profitability of Islamic and conventional banks.