The impact of credit and liquidity risk on bank financial performance: the case of Indonesian Conventional Bank with total asset above 10 trillion Rupiah

This paper examines the impact of credit and liquidity risk on bank's financial performance. This study especially focuses on Indonesian Conventional Bank with total asset above 10 trillion Rupiah within 2007 to 2011. Bank financial performances are measured by return on asset, return on equity and net interest margin; credit risk are measured by non-performing loan ratio and liquidity risk are measured by liquidity ratio. Furthermore, this study also measured bank capital and bank size's effect on bank financial performance. The results show that credit risk has negative significant effect on ROA and ROE. While liquidity ratio was found having positive significant effect on ROA and ROE. The effect of bank capital is positively significant on ROA, ROE, and NIM, while bank size was only found to have negative significant impact on NIM. Both credit risk and liquidity ratio was found to have insignificant impact on NIM.