Analysis of financial performance, credit, and liquidity risk, as well as profitability and capital aspects at rural banks

Abstract

The study aims to analyze the performance of 50 Banks (BPRs) that carried out the merger process in 2014-2020 with a data period of one year before and three years after the merger. The study aims to provide an overview of the condition of BPRs after three years of merger, whether they have shown good performance or otherwise. This is related to the synergy theory, which plays a very important role in determining the success of a merger and producing a healthy BPR with strong competitiveness. Results research on 50 BPRs after three years of merger showed differences in assets, third-party funds, credit, and liquidity risk, while in profit, NPL ratio, LDR, profitability aspects, and capital aspects did not differ. In addition, the results of the correlation study showed a significant relationship between assets, third-party funds, credit, NPL, and profit to core capital, thus reflecting that the merger process can increase core capital. BPRs that merge must create synergy so that the purpose of the merger is to produce healthy BPRs with strong competitiveness. This synergy includes management, human resources, work culture, information technology, standard operating procedures (SOP), a span of control, and the determination of business models. Considering that mergers are an obligation that must be carried out for BPRs owned by the same shareholders and for BPRs that cannot meet the core capital requirements, efforts are needed to accelerate the merger by providing sweeteners so that the merger becomes attractive to shareholders and investors, including accelerating the merger licensing process, making it easier initial Public Offering (IPO) as well as tax relief and legal costs.