Structural equation modeling to evaluate the performance of financial in Indonesian Conventional Commercial Banks

As a financial intermediary institution, banks operate in a dynamic and complex environment influenced by internal and external factors and various risks that impact their financial performance. This study aims to examine the influence of bank-specific variables and macroeconomic variables that affect credit risk and Indonesian conventional commercial banks' financial performance. Structural equation modeling is used to analyze time series data from quarter 1993 to quarter 2023. This analysis covers conventional commercial banks registered in Indonesia, namely Bank Mandiri, Bank Rakyat Indonesia, and Bank Negara Indonesia. The results of the study indicate that conventional commercial banks in Indonesia are able to manage their specific variables effectively so that financial performance increases and non-performing loans decrease. In addition, the stability of economic conditions contributes to an increase in the volume of available loans, allowing commercial banks to earn higher income from loan interest. Therefore, the banking sector can benefit from some recommendations made in this study, especially concerning conventional commercial banks in Indonesia.