Money Deposit Bank Asset / Liability Management And Profitability (A Case Study Of Access Bank And First Bank Of Nigeria)
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This work is dedicated to Almighty God the father on whom I have joy and to my Beloved parents.
I wish to express my profound gratitude to the personalities who contributed in no small measures to the success of this work.
Firstly, to my supervisor, Mr. J. U. Osubor for introducing me to this work and for his patience and challenges as spurned by his principles which drew out from me the urge to perform throughout the duration of the work.
My warmest gratitude goes to my lovely parents, Mr. and Mrs. Rowland Anokam, whose love, care and prayers sustained me throughout the trying period of completing and presenting this work and my entire academic season. Your encouragement and support are superlative.
My heartfelt gratitude goes to my lovely friend Gloria Nvene, you are the architect and framework on which this research work was built. May God reward your heart.
I remain grateful to aunty Akwaugo for her support and to my lovely brothers and sisters, Chinyere, Basil, Chibuike, Chiamaka, Amarachi, Uncle Angus, Robert, Christina, and Oluchi.
They were the foundation of my education in diverse manners all through the period, thanks for loving your sister.
My gratitude also goes to my H.O.D, Mr. N.O.N Kanu and other lecturers in Banking and Finance department for your contribution in my pursuit for excellence, to you I say thank you.
My regards to my wonderful friends Chidimma, Favour, Ugochi, Nkiru, Aborisade always standing the gap, may God reward you richly.
Above all, my heartfelt gratitude to God my father and Jesus Christ my Lord who have prove to me again that in all conditions, prayers are answered. In all things I give you thanks.
Anokam Chioma Lyndy
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.
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; and;
- 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 year
1.8 Limitation Of The Study
In the course of writing this research there were a lot of limitation s , problems that tends to put an end towards the success of this research work . the following are the problems encounterd on the course of carrying these research work.
The time for this work to be complete and submitted was limited
Other Academic work such as writing some term papers attending lectures and preparing for my on coming examination.
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.
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How to nail it on the head during your project defence
You are through with writing that project. Now what?
You have found yourself at that point where you have to defend what you have written. Of course you have to stand in front of your supervisor and other literary personalities to prove that you know what you wrote in your project paper. Unfortunately, the more you think about it, the more it looks like you are about to face a legion. It is not a war. But the emotion of dread welling up inside of you makes it look like one. So now you are asking yourself questions.
- How am I going to start?
- I hope I will do well enough to get an A.
You really want to nail it, but you need to come to terms with exactly how to get everything in perfect control. Especially your emotions of fear that seem to make a wreck of you every time you think about public speaking.
So here is the deal. I want to help you avoid that feeling that would ruin your precious moment if you dare to let it. And we are going to do it together.
I am going to highlight some very important tips to help you get in control for you to be comfortable enough to move from that feeling of DREAD to CONFIDENT; and making an awesome Impression for that great rating your supervisors should be giving to you so freely.
Consider these tips as you prepare for your defence. We will be taking them one after the other so here we go.
Watch Your Body Language And Keep It Confident:
Can you tell that a person is falling apart if they look confident? … If I can second guess you rightly, am sure you answered no to that question. Remind yourself that you need to come out that way. Now this might seem like a huge big deal when you are dealing with the foreboding. Maintaining a poise of confidence is very important. So find your most comfortable position, sitting or standing and draw up your body. You must exude confidence. It is something you need to do for yourself. People can only see what you allow your body language to show. So you must endeavour to put that out. Remember the story of David and Goliath? … At the end of your defence day, you want to be David.
Dress In Your Most Comfortable And Impressive:
Am sure this one is a no brainer. However I must highlight that you choose comfortable pieces. You don’t want to look so good and yet look like you were forced to wear something that does not belong to you. It’s great to ensure that as impressive as your clothes are on you, that they are also very comfortable.
Speak With Authority:
Going hand to hand with that aura of confidence is your most powerful asset:your words. If you look that confident, your words must not come out like whimpers. To be able to pull this off, you definitely need to speak as deliberately as possible in expressing yourself. Let them also hear what they see.
Use, Your Gestures:
I have often found this to come to my rescue in dealing with shyness and conveying my confidence. Usually it gives you an edge to also drive home your point. You must, however, ensure that you do not over use it. It doesn’t mean that your hands should be flying all over the place. That would be absolutely unnecessary. If you do this well, after a while you will realize that you are not as self-conscious as you used to be at the very start. For most situations, it would have completely disappeared altogether; leaving a really confident you talking.
Have A Good Opening And Closing Line:
Make sure you have perfected a good opening line. You should also be armed with a good closing line too. Try and rehearse it to a friend. If for the first time you presented it, your friend does not say “wow, that’s beautiful” or something like that; just know you need to keep refining it until you get the perfect line. Both opening and closing lines will go a long way in how impressed your panel gets to rate you high.
Make Sure You Know Your Work:
Certainly you should understand how important it is to know your own work from start to finish. Not having in-depth knowledge of your own work is tantamount to a suicide mission. Why should you kill yourself?
When all is said and done, this is what you came to defend in the first place. You should know your work from A to Z.
Prepare For The Questions:
Now this part is truly essential. You must be sure you do not floor all the good work you did on your presentation by not answering correctly. You must pay attention to the questions you are asked to be sure you will give the right answer. Many people get it wrong at this stage and spoil their good presentation. When you do not understand any question do endeavour to ask the person to expatiate what they mean before you answer.
These tips are by no means exhaustive, but applying these tips will give you some necessary advantage you need for a great outcome. Of course that outcome would mean that you eventually earn all your points on this project.
The structure of a good project work
Undergraduate projects in Nigeria is a prerequisite for graduation amongst Nigerian tertiary students who will which to obtain bachelors degree in their respective courses of study such as accounting, banking and finance, business administration and a host of others. Writing an undergraduate project in Nigeria for final year students entails a lot both financially and otherwise. Being able to develop any final year project depends on getting a researchable topic whether it is Accounting Undergraduate project topics, Banking and Finance research topics or banking and finance project topics and materials and it all requires diligent hard work of students who are willing to develop best undergraduate projects in Nigeria and graduate in flying colors.
A typical Undergraduate project in Nigerian tertiary institutions can be said to be divided into five or six chapters depending on the format of the school and course of study which are
The introduction of an undergraduate project states the main research problem and research argument. What precisely the study is all about and why it is important. It looks at the originality of the research work and how it will fill the gap in other studies. Justification for a research undergraduate topic should not be lengthy before it has been explicitly stated.
Below are the contents in chapter one of an undergraduate research project which includes;
- Background of the study,
- Statement of the problem,
- Objectives or aims of the study,
- The research questions,
- Research hypothesis,
- Significance of the study,
- Scope of the study,
- Limitations of the study and
- Operational definition of terms.
2. Literature review
Literature review of any undergraduate research work, be it business administration project topics or Economics project topics just to mention a few is very critical to securing a high grade in one’s project work. The literature review of a research process uncovers what other writers have written about the student’s topic. A student’s undergraduate research work should include a discussion or review of what is known about the subject and how that knowledge was acquired. The review could conclude with a brief summary of the literature and its implications. The contents of the literature review are the theoretical review, conceptual framework, empirical review and summary of literature review.
3. Research Methodology
This section includes a description of the research methods used in the undergraduate research work such as the sample size, data collection methods, measurement instruments, research data analysis procedures and the population from which the sample was selected. This section also describes the method used in selecting the sample or samples, validation and reliability of the instruments used in the research work. There are different research statistical techniques used in undergraduate research work such as SPSS, e-views etc.
4. Results & Discussion
This section presents and discusses the data analysis results used in an undergraduate research work, the results of each analysis is being summarized, tabulated, and then discussed for each research question. Then for each research hypothesis, the statistical test of significance selected and applied to the data is briefly described, followed by a statement indicating whether the hypothesis was supported or not supported. In presenting the result analyses/summary in an undergraduate project tables and figures and or graph are used to add clarity to the presentation.
5. Summary, Conclusions And Recommendations
This section summarizes the findings of the study in an easy to understand manner. It also explains the practical implications of those findings, and points to recommended directions for future research in that area.
This is where every source cited in the undergraduate research work is being included. Every undergraduate research work must be properly referenced for its authenticity.
Choosing A Good Project / Research Topic
Students in Nigerian universities these days wish to choose a very simple project topic/material. There is no issue choosing a simple project topic; the only problem is your ability to choose a good project or research topic that your supervisor will easily approve for you.
Most project supervisors really want to see how good his or her project student understands his or her surrounding through the kind of topic he or she chooses for their project work.
There are some project topic that are not reject-able; for instance in Nigeria of today; what do you think is the major issue on ground now?
If a project student can choose or craft a topic on the effect of dollar increment on the economy of Nigeria. Such project topic will be very interesting to write on.
Now what are the qualities of a good project topic?
- The materials for the project topic must be easily assessable.
- The project topic itself must be meaningful.
- The variables must be able to give a clear aim of the project topic.
What do I mean by variable?
Well I am deriving my point from the area of ; the variables here are those main words in the project topic.
Like the above project topic; the effect of dollar increment on the economy of Nigeria. You can see the main variables that really define this project topic are:dollar, increment and economy.
Before you present your topic to your project supervisor, first of all understand your project topic, and then secondly try to do some research for your topic to see if at least you can get up to 60% of what you need to write the complete project.
I said that above because you might have a very nice topic that the materials are not available online and there are no books as regard the topic; in this case the project topic becomes difficult for you even though the topic is catchy.
What do I mean by your topic being assessable?
Well what I mean is very simple and easy to understand. Simply pick your project topic, type it on google and see if you will have at least a good background for the topic you are writing on.
If you can have a good background for your project topic and you can understand the problem associated with the project topic, then I believe the aim of the project is not far-fetched.