The Effect of Fee-Based Income and Operating Expenses on the Financial Performance of Banks Listed on the Indonesia Stock Exchange for the 2022–2025 Period

Abstract

Rapid digitalization has encouraged banks to rely not only on interest income but also on revenue generated from services, commonly referred to as fee-based income. At the same time, rising operating costs, as measured by the BOPO ratio, may lead to a decline in how efficiently banks operate. Given the inconsistent findings of previous studies, this research examines whether fee-based income and operating expenses affect the financial performance for lenders registered on the IDX throughout the four-year span from 2022 to 2025. This research adopts a quantitative approach, drawing on secondary data taken from annual reports. Sixteen of the 47 banks listed on the IDX were selected through purposive sampling based on predetermined criteria, producing 64 observations for the 2022–2025 period. Fee-based income is measured using the non-interest operating income ratio, operating expenses using BOPO, and financial performance, which is proxied by Return on Assets (ROA).  The data were first subjected to classical assumption tests (normality, multicollinearity, heteroscedasticity, and autocorrelation) before being analyzed with multiple linear regression. The results indicate that fee-based income has a significant positive association with ROA (t = 2.023; p = 0.047), whereas operating expenses exerts a significant adverse effect on ROA (t = −5.156; p < 0.001). Both variables are also jointly significant (F = 24.609; p < 0.001). The independent variables jointly explain 42.8% of the fluctuation in ROA, as shown by the adjusted R² value of 0.428. These findings suggest that bank managers should expand service-based revenue while maintaining operating-cost efficiency to support profitability. The study also contributes to financial accounting research and investment decision-making.