The Effect of Macroeconomic Conditions and Income Structure on The Stability of Bank Profitability in ASEAN-5

Ayu Ratnaningsih (Universitas Negeri Surabaya, Surabaya)
Aminudin Ma’ruf (Universitas Negeri Surabaya, Surabaya)

EKONOMI, KEUANGAN, INVESTASI DAN SYARIAH (EKUITAS)
Vol 7 No 4 (2026): May 2026

This paper investigates the factors affecting profitability stability of the ASEAN-5 (Indonesia, Malaysia, Philippines, Singapore and Thailand) commercial banks such as income structure, bank specific characteristics, and macro economy factors. This research uses volatility of return on assets (VolROA) instead of ROA and ROE, which are used in previous studies mainly to measure profitability levels, to proxy for profitability stability, thereby capturing the stability of bank earnings over time. This study utilizes panel data of ASEAN-5 commercial banks for a period of 10 years from 2015 to 2024 and employs a fixed-effects regression model to determine the factors affecting the stability of commercial bank profitability. The results indicate that the drivers of non-interest income diversification, bank size, lending activity, degree of deposit funding, condition of the GDP growth, exchange rate, and real interest rates have a significant impact on reducing the volatility of earnings and enhancing the stability of bank profits. Meanwhile, there is an association of higher equity levels with higher volatility in profitability, suggesting a greater level of risk taking by more highly capitalized banks. Moreover, the addition of macroeconomic variables to the model further adds to the model's explanatory power, indicating that the banking stability is not only dependent on the characteristics of the bank, but also on the economic environment of the bank. This study builds on the literature on banking stability by presenting new empirical findings on the stability of banking profitability for the ASEAN-5 commercial banks, which is less thoroughly examined in emerging banking markets, by using the VolROA methodology as well as by placing bank-specific and macroeconomic determinants into a unified empirical framework. The results also have practical implications for regulators and bank management in considering strategies to enhance banking resilience and ensure stable profitability, given the dynamic economic environment.