The Impact of Financial Ratios on Bank Performance Before and During COVID-19: Evidence from Bank Business Activities Category 3 and 4 in Indonesia

Keeping in mind the year 2020 until the end of 2022, the COVID-19 pandemic and its economic turmoil shocked banking sectors. The COVID-19 pandemic has caused significant disruptions to economies across the globe, and Indonesia is no exception. As a result, the banking sector in Indonesia has been particularly affected. This research aims to investigate the banking situation in Indonesia during COVID-19 and how it has affected bank profitability (ROA). Profitability is a ratio that measures the company's ability to generate profits. Return on Assets (ROA) is one of the profitability ratios. Return on assets (ROA) is a commonly used financial ratio that measures a company's profitability. For this research, the dependent variable is return on asset to measure bank profitability. The independent variables are non-performing loan, net interest margin, operating expense to operating income, loan-to-deposit ratio, and capital adequacy ratio. This research also uses control variables. The control variables in this research are bank size, GDP growth, inflation, and interest rates. Since this research also aims to investigate the effect of the COVID-19 pandemic on banks' profitability. The covid-19 pandemic is also an independent variable used as a dummy. The sample used in this research are commercial banks business activity category 3 and 4. The methodology of this research utilises panel data and a two-step system GMM. Thus, this research has discovered that COVID-19 affected ROA negatively and significantly. Additionally, the financial ratios that affected ROA are NIM and OEOI.