Credit Risk and Bank Profitability: Empirical Evidence on the Impact of Non-Performing Loans on Net Income at PT Bank Mandiri (Persero) Tbk
Keywords:
Non-Performing Loan, Net Income, Bank Profitability, Credit RiskAbstract
This study investigates the relationship between non-performing loans (NPL) and net income at PT Bank Mandiri (Persero) Tbk over the quarterly period from Q3 2016 to Q4 2024. Employing simple linear regression on 34 quarterly observations drawn from audited consolidated financial statements, the analysis reveals a statistically significant positive association between absolute NPL balances and net income (β = 1.806; p = 0.035), with an adjusted R² of 0.095. This counterintuitive finding is attributed to concurrent loan portfolio expansion, in which interest income generated from a growing loan book materially exceeds the incremental credit losses embedded in rising NPL figures. Bank Mandiri's bank-only NPL ratio simultaneously declined to 1.02 percent by end-2023 well below the regulatory ceiling of 5 percent indicating that credit quality actually improved even as absolute NPL grew. The study contributes to the Southeast Asian banking literature by demonstrating that absolute NPL balances must be contextualised within loan portfolio growth dynamics to yield meaningful inferences about bank earnings. Policy and managerial implications are discussed.
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Copyright (c) 2026 Azriel Fathan Nugraha (Author)
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