Analysis of Banking Risk Effect on The Profitability of Islamic Commercial Banks in Indonesia

This research aims to analyze the effect of banking risk consisting of credit risk, liquidity risk and operational risk on banking profitability. Credit risk is proxied by Net Performing Finance (NPF), liquidity risk is proxied by Finance to Deposit Ratio (FDR), and operational risk is proxied by Operating Expenses and Operating Income (BOPO), while Net Returns measure profitability. The method used is panel data analysis with the Gretl application using data from Islamic Commercial Banks in Indonesia that meet specific criteria. The data observation period is from quarter 4 of 2013 to quarter 3 of 2023, so there are 200 observations. The research results show that credit risk and operational risk significantly negatively affected profitability, while liquidity risk had no effect. This research implies that Islamic banking should channel the funds that have been successfully collected to be distributed to debtors, especially those operating on an MSME scale so that the level of banking liquidity risk can be more stable and prospect to have an impact on increasing banking profitability.