Factors affecting Islamic bank profitability in Indonesia

The purpose of this study is to analyze the factors affecting the profit of Islamic banks in Indonesia. The data used is monthly data of 2010:01-2015:03. Data collected from Indonesia Financial Services Authority and Bank Indonesia. Islamic bank profitability is measured by return on equity (ROE) and return on asset (ROA) as a function of bank specific determinants.The methods of analysis used are Co integration and Error Correction Models.The empirical results show that operational efficiency, inflation and bank size have a negative and statistically significant effect in determining return on equity, while financing to deposits ratio has a positive and statistically significant effect on it in the long-run.In the short-run, only operational efficiency and financing to deposits ratio have a significant effect on return on equity.Return on asset is influenced negatively by operational efficiency in the short and long run and it influenced positively by financing to deposit ratio in the short run