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Money Deposit Bank Asset  Liability Management and Profitability A Case Study of Access Bank and First Bank of Nigeria

Money Deposit Bank Asset / Liability Management and Profitability

Project / Seminar Material
Reference ID: PS-271-TM

DEDICATION

This research material titled “Money Deposit Bank Asset / Liability Management and Profitability” is dedicated to God for his enabling grace, and to all computer enthusiasts who contributed to make life a pleasant experience during my research documentation.

ACKNOWLEDGEMENT

I extend my sincere gratitude to all those who contributed to the completion of this project. Special thanks to my Supervisor (Name of your Supervisor), the Head of Department (Name of your HOD), the Lecturers in the department of Banking and Finance (BF), Book Authors and Profound Scholars of existing or related project material on “Money Deposit Bank Asset / Liability Management and Profitability” for their invaluable guidance, support, and expertise throughout the journey.

I am also grateful to your study area (mention any funding organizations, if applicable) for their financial assistance. This research would not have been possible without the encouragement and assistance of some stakeholders (mention any mentors, teachers, or colleagues). Additionally, I would like to acknowledge the understanding and patience of my family and friends during this endeavor. Your unwavering support has been a constant source of motivation. Thank you all for being part of this meaningful endeavor.

TABLE OF CONTENTS

PRELIMINARY PAGES


CHAPTER ONE

INTRODUCTION


    CHAPTER TWO

    LITERATURE REVIEW

    • 2.1 Introduction
    • 2.2 Conceptual Review
    • 2.3 Theoretical Framework
    • 2.4 Empirical Studies

    CHAPTER THREE

    RESEARCH METHODOLOGY

    • 3.1 Introduction
    • 3.2 Research Design
    • 3.3 Population of Study
    • 3.4 Sampling and Sampling Technique
    • 3.5 Validation of Research Instrument
    • 3.6 Method of Data Collection
    • 3.7 Method of Data Analysis
    • 3.8 Questionnaire Administration
    • 3.9 Ethical Consideration
    • 3.10 Statistical Analysis

    CHAPTER FOUR

    DATA ANALYSIS, RESULT AND DISCUSSION

    • 4.1 Introduction
    • 4.2 Presentation and Analysis of Data
    • 4.3 Re-statement of Research Questions
    • 4.4 Test of Hypotheses
    • 4.5 Discussion of Findings

    CHAPTER FIVE

    SUMMARY, CONCLUSION AND RECOMMENDATION

    • 5.1 Introduction
    • 5.2 Summary of Findings
    • 5.3 Conclusion
    • 5.4 Recommendation
    • 5.5 Suggestion for Further Study

    REFERENCES

    APPENDIX A - “QUESTIONNAIRE”

    ABSTRACT

    Asset Liability Management is critical for sound management of the finances of any organization that invest to meet its future cash flow needs and capital requirements. Efforts are required to monitor and co-ordinate the activities of asset liability management. Lack of autonomy, weak supervision by Central Bank of Nigeria and non-compliance of the Money deposit banks leading to drop in profits, merging and collapsing of commercial banks. This study is an evaluation on the influence of money deposit banks Asset/Liability management and profitability with specific interest in Diamond Bank and First Bank of Nigeria Plc.

    The objectives of the study were; to determine the influence of customer deposits; loans advanced to customers; management of the loans advanced to customers and management of loans from other banks influence the Net Interest Income (NII) of Diamond Bank and First Bank.

    The study adopted a case study design and made use of Secondary data which was obtained from the bank's annual audited financial statements from 2010-2015.Based on the findings, the study recommended policies that would encourage revenue diversification, reduce operational costs, minimize credit risk and encourage banks to minimize their liquidity holdings.

    Further research on factors influencing the liquidity of commercials banks in the country could add value to the financial performance of banks and academic literature for further study.


    Money Deposit Bank Asset / Liability Management and Profitability (A Case Study of Access Bank and First Bank of Nigeria)

    CHAPTER ONE

    1.0 Introduction

    This is the introductory chapter of the chapters. is briefly explains the background of the study, statement of the problem, objectives of the study, research questions, statement of hypothesis, significance of the study, scope of the study, limitations of the study and definition of terms.

    1.1 Background of the Study

    The stability of commercial banks as whole in the economy depend on proper asset liability management structures. Better asset liability management have the tendency to absorb risks and shocks that commercial banks can face. Moreover, asset liability management is the perquisite condition for the efficiency and growth of commercial banks. Asset liability management in commercial banks is determined by the ability of the banks to retain capital, absorb loan losses, support future growth of assets and provide return to investors. The largest source of income to the bank is interest income from lending activity less interest paid on deposits and debt. For a bank to attain the same objectives then it has to ensure proper asset liability management, including liquidity risk management, interest rate risk management and credit risk management (Francis, 2007).

    The Central Bank of Nigeria (CBN) prudential guidelines on asset liability management stipulates that, in order to effectively monitor its liquidity risk, credit risk and interest rate risk an institution is supposed to establish an Asset Liability Committee (ALCO) with the following four key roles:

    First, management of the overall assets and liabilities of the commercial bank ;

    Second, ALCO must report directly to the Board and in the case of a foreign incorporated bank, report to the senior management of the institution in the country;

    Third, ALCO must facilitate, coordinate, communicate and control balance sheet planning with regards to risks inherent in managing liquidity, credit and convergences in interest rates;

    Fourth, ALCO is responsible for ensuring that a bank's operations lies within the parameters set by its Board of Directors (Central Bank of Nigeria Report, 2010).

    Financial distress has afflicted numerous commercial banks, many of which have been closed down by the regulatory authorities or have been restructured under their supervision. Some commercial banks were closed between 2003 and 2004 Further some commercial banks were taken over in that same period.

    The recent rise in non-performing loans is widely spread across commercial banks in Nigeria and is evident in both public and private owned banks. The upward trend of non-performing loans started immediately with the outbreak of the financial crisis in 2008, but the sharp increase occurred two years later. In 2010 The non performing loan rate increased from 18.5% to 20.5%.

    The rate also increased to 22.5% in 2012 and 25.7% in 2013. The upward trend reflects in part the consequences of heightened unemployment in Nigeria which, together with depreciated currency and tight financial conditions, weakened the borrowers' repayment capacity.


    1.2 Statement of the Problem

    Weakness in Nigeria Banking system is becoming apparent and is manifesting in the relative controlled and fragmented financial system in Nigeria . This can be attributed to differences in regulations governing banking and non-banking financial intermediaries, lack of autonomy and weak supervisory capacities carried out by the central banks surveillance in enforcing banking regulations.

    The number of Non -Performing Loans is increasing overtime from 22% to 27.3% of the Total Loans. This can be attributed to non-compliance by the banks as per the Central Bank of Nigeria regulations. Further, the level of credit risk is increasing overtime.

    It is not clear the extent to which asset liability management relates to financial performance. This study seeks to assess influences of financial performance of commercial banks in Nigeria with specific interest of Diamond Bank and First Bank of Nigeria.


    1.3 Objectives of the Study

    The general objective of this study is to determine the influence of asset liability management on financial performance of Commercial banks in Nigeria with reference to Diamond Bank and First bank. Study has following specific objectives:

    i. To determine the influence of customer deposits on the profitability performance of Diamond Bank and First Bank of Nigeria.

    ii. To determine the influence of loans to customers on the financial performance of Diamond Bank and First Bank of Nigeria.

    iii. To establish the influence of managing non-performing loans on the profitability performance of Money deposit banks in Nigeria

    iv. To establish the influence of management of loans from other banks on the profitability performance of Money deposit Banks in Nigeria.


    1.4 Research Question:Does customers' deposits have any influence on the financial performance of Diamond Bank and First bank of Nigeria

    Does Loans to customers have any influence on the profitability performance of Diamond Bank and First Bank of Nigeria

    Does customers' deposits have any influence on the profitability performance of Money deposit banks in Nigeria

    Do you agree that management of loans from other banks has no influence on profitability performance of Money deposit banks in Nigeria


    1.5 Research Hypotheses

    H0: customers' deposits have no influence on the financial performance of Diamond Bank and First Bank.

    H1: customers' deposits has influence on the profitability performance of Diamond Bank and First Bank.

    H0: customers' deposits have no influence on the profitability performance of Money deposit banks in Nigeria.

    H1: customers' deposits has influence on the profitability performance of Money deposit banks in Nigeria.


    1.6 Significance of the Study

    This research study was significant because it dealt with issues in Nigeria Money Deposit banks are facing and will continue to confront in the future. in the present scenario, asset liability management is important for the banking industry due to increased importance of managing the asset liability mix.

    It will help to assess the risks and manage the risks by taking appropriate actions. So, to understand the asset liability management process and various strategies that are helpful for the banks to manage the risks, this topic was selected. Therefore, it was beneficial for me to develop my knowledge regarding the asset liability management process, functions and its effect in the financial performance of commercial banks. The research study might contribute and form the basis for further research into the application of innovative asset liability management strategies in liquidity risks by similar industry players. This can go a long way in coming up with even better and more efficient strategies that are specific to different bank sizes, markets in which they operate and balancing of the different risk appetites that may be present within the different banks.


    1.7 Scope of the Study

    This study is concerned with Money deposit banks Assets/Liability management and profitability, its Actual contributions to the banking industry and problems faced by bank that do not manage their Assets/Liabilities effectively . A case study of Diamond bank and First bank of Nigeria are within this scope between the year2010-2015.


    1.8 Limitation of the Study

    In the course of writing this research there were a lot of limitations, problems that tends to put an end towards the success of this research work . The following are the problems encountered on the course of carrying these research work.

    Time Constraints: The time for this work to be complete and submitted was limited

    Other Assignment: Other Academic work such as writing some term papers attending lectures and preparing for my on coming examination.

    Financial Constraints: This is another factor that hinders the success of the research work. Inadequate finance made me not to get information from various places like internet browsing as well as going to different banks in search of information.

    CHAPTER TWO

    2.0 Literature Review

    2.1 Introduction

    This chapter focuses on the review of related literature. A literature review includes the current knowledge as well as theoretical and methodological contributions to a particular topic. It documents the state of the art with respect to the topic you are writing. It surveys the literature in the topic selected. In this research work the literature review includes the …

    Summary Headlines for Money Deposit Bank Asset / Liability Management and Profitability



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