Risk Management and Profitability in Nigerian Deposit Money Banks
Adedeji, Abosede o. & Depo-Mogaji, Taiwo o.
Department of Business Administration, Federal University of Technology, Akure
Department of Project Management Technology, Federal University of Technology, Akure
Corresponding Author: Adedeji, Abosede o.
ABSTRACT
The study was designed to examine the effects of risk management on profitability of deposit money banks (DMB) in Nigeria. Survey research design was employed Place and The study was carried out on licensed deposit money banks in Nigeria. It covered five years from 2009 to 2014. This research involved eight (8) out of the 21 deposit money banks in Nigeria for the period 2009 to 2014. The sample was selected using judgmental sampling technique which is a non-probability sampling method. The eight banks in consideration are First Bank of Nigeria, Guaranty Trust Bank, Access Bank Plc, Zenith International Bank, Wema Bank of Nigeria, First City Monument Bank, Skye Bank and United Bank for Africa Plc. Secondary data were collected from 2009 to 2014 based on the annual reports and accounts of the chosen banks. The research used both descriptive statistics such as percentages, frequency and standard deviation and inferential statistics which are multiple regression and panel data to test the relationship between risk management and profitability. The findings revealed that banks with good credit risk management have better performance. The average Return on Asset (ROA) was 9% and the average value for Return on Equity (ROE) was 18%. The result shows that non-performing loans and provisions have an adverse effect on profitability with negative 0.1451NPL and negative 0.1452NPL on ROA and ROE respectively. The findings showed that bad loan provision eat deep into profit in Nigerian DMB. The work concluded that risk management positively affects profitability of Nigerian deposit money banks and recommended that banks should implement effective tools and techniques to reduce credit risk failure in Nigerian DMB.
Keywords: Risk management, profitability, deposit money banks
