Portfolio Management In Nigerian Banking Sector (A Case Study Of Diamond Banks Plc)

Project and Seminar material for Banking and Finance

Project and Seminar material for Banking and Finance


Abstract


The major purpose of this study is to find out how Diamond bank manages their portfolio with respect to investment and lending practices because proper portfolio management would have a significance impact on the profitability. five (5) commercial banks were selected as a result of a preliminary survey which shows that their were the only banks willing to asset in their study. And enough information gathered through the use of structures questionnaires and personal interview officer of these banks.

It was observed that these banks have specialist investments department that were specially established to take care of their investment functions, it was found that Diamond banks should enlarge their investment activity and they should seek for new authorities in order to enhance their profitability base and penetrate economic growth. And the central bank on Nigeria (CBN) Should be significantly autonomously and well equipped to regulate the banking sector in the economy.


Table Of Contents


Preliminary Page(s)

  • Title Page
  • Approval Page
  • Dedication
  • Acknowledgement
  • Abstract
  • Table Of Contents

Chapter One

1.0 Introduction

  • 1.1 Background of the study
  • 1.2 Statement of the problem
  • 1.3 Objectives of the study
  • 1.4 Research questions
  • 1.5 Significance of the study
  • 1.6 Scope of the study
  • 1.7 Limitation of the study
  • 1.8 Definition of terms

Chapter Two

2.0 Literature Review

  • 2.1 Introduction
  • 2.2 Evolution and development of banking
  • 2.3 The principle and practices of portfolio management in Nigeria banking sector
  • 2.4 Portfolio diversification theories
  • 2.5 Diamond banks and portfolio theories
  • 2.6 Capital assets pricing model
  • 2.7 Portfolio theories
  • 2.8 Application of portfolio theories by Diamond bank in Nigeria
  • 2.9 Portfolio planning Objective

Chapter Three

3.0 Research Design And Methodology

  • 3.1 Introduction
  • 3.2 Research design
  • 3.3 Sources/method of data collection
  • 3.4 Population and sample size
  • 3.5 Sample technique
  • 3.6 Validity and reliability of measuring instrument
  • 3.7 Method of data analysis

Chapter Four

4.0 Research Design And Methodology

  • 4.1 Introduction
  • 4.2 Presentation of data
  • 4.3 Analysis of data
  • 4.4 Test of Research Questions
  • 4.5 Interpretation of data

Chapter Five

5.0 Summary, Conclusion And Recommendation

  • 5.1 Introduction
  • 5.2 Summary of findings
  • 5.3 Conclusion
  • 4.4 Recommendations
  • Bibliography
  • Questionnaire

Chapter One


1.0 Introduction

This introduction expresses I.B.MS view point about the foundation essential of portfolio management and also discuss uses ideal and assets that support and enable effective portfolio management practices. A good way to begin understanding is what portfolio management is (and is not ) may be define the term portfolio.

In business contexts, we can look to the mutual fund industry to explain terms origins, and form it you can build the portfolio by buying additional stocks, bonds, mutual funds or other investments, your goal is to increase the portfolio value by selecting investments that will go up in price.

By modern portfolio theory you can reduce your investment risk by creating a diversified portfolio that includes enough different types so that the may produce strong returns in any economic.

The explanation above contains a number of important ideals. A portfolio contain many investment vehicles owning a portfolio involves making choices, that is deciding what additional stocks, bonds or other financial instrument to buy, when to buy , what and when to sell.

This is also refers to the practice of managing and entire group or major subset of software applications within a portfolio. Portfolio management is the management of various financial assets, which comprise the portfolio.


1.1 Background Of The Study

The Diamond bank portfolio management represents a classical management of its assets. The risk inherent in investment yield in efficient portfolio management which is very casual because if our investors contribute to our econmy, they have make devour from a very risk portfolio with low return and make casual inquires about portolio through conversion with brokers, reading annual report of cooperate entities, in addition to sanitizing the financial publications pages.

For maximum return and minimum risk of the overall portfolio as well as the link between two or more investment diversification because of the tangent of investors.

This work also examines the real denotation of portfolio management in Nigeria banking sector and gives a deserving book into evolution of portfolio theory and its contribution towards investor’s efficient choice of portfolio.

The word portfolio as a collection securities and investment like stock, shares, bonds, etc owned by an individual or a bank and other corporate or non corporate organization, which portfolio management is the art of controlling, directing, planning, organizing and co coordinating securities and investment such as (shares, stock , bonds etc) owned a bank , an individuals co operate and non co operate and non organization with the aim of making profit.

The securities can be grouped into two categories, such as the fixed income securities and variable income securities.

The fixed income securities are debt instruments, like commercial papers, bonds, certificate of deposit while the variable income securities are shares, ordinary shares, and preference shares.


1.2 Statement Of The Problem

Recent years have witnessed a heightened interest in portfolio management, not only in the technical community, but in the CEO’S office as well. Despite its growing popularity, recent bench making studies have identified portfolio management as the weakest area in product innovation management.

Management teams confess that there are rarely serious Go/kill decision points and more specifically, no criteria for making the Go/kill decision, as a result of these, banks are facing too many projects for the limited resources available.


1.3 Objectives Of The Study

The objectives or purpose of this study is to empirically examine the portfolio management in Nigeria Banking Sector (DIAMOND BANKS).

To achieve this study is through the following process.

  1. To draw a comprehensive comparison of the portfolio management of Nigeria Banks.
  2. To find our portfolio management practices of Diamond bank, central banks of Nigeria credit guidelines and suggest ways of correcting any deviation.
  3. To examine the patterns and wealth maximization practices of Diamond bank and attempt to suggest measure to alleviate identified problem.
  4. To form the investment strategy and select an investment mix to achieve the desired investment objective.
  5. To provide a balance portfolio which not only can hedge against the inflation but can also optimize returns with the associated degree of risk.
  6. To make timely buying and selling of securities.
  7. To maximize the after tax return by investing in various taxes saving investment instruments projects form.

1.4 Research Questions

In order to ensure that the purpose of this study is achieved, the following research questions have been drawn to guide this research work.

  1. Do Diamond bank have special investment portfolio?
  2. How do Diamond banks manage their investment portfolio?
  3. What are the factors take into consideration by Diamond banks in appraising a loan?
  4. What are there functions of the investment department of zenith banks?

1.5 Significance Of The Study

The banking industry has been and still regarded as the pivot of the nations economy. Banks are involved in mobilization of the economy and such funds portfolio are used for investment or used for reinvestment purpose.


1.6 Scope Of The Study

This study is focused on the bank in Aba offices and was culmed to investigate portfolio management strategy in these banks and also to see whether it is any way influenced by the nature of operation of this banks and to determine if the influence is positive or negative in nature. As result any influenced that is capable of affecting the success of the bank deserves isolation and profit investigation.


1.7 Limitation Of The Study

Base on the study the following are assumed:

  1. Lack of effective portfolio management.
  2. Financial crisis faced by some Diamond bank in the country.

1.8 Definition Of Terms

The use of some terms in this project work may create problem to some project who are not into their banking profession , hence there is need to give the operational definition of these technical terminologies of these words include

Portfolio:

It can be define as flat case for carrying looses, papers, documents, and drawings etc. in order hands portfolio is refer to invest in a group of securities rather to invest in a single securities.

Management:

The control and making decision in a business or similar organization.

Bank:

It is an organization or a place that provides financial services, and where customers keeps their money for safety and it is paid out when needed by means of cheque or cash. And it is an institution , which deals with money and credit.

Investment:

The investing of money in the industry.

Organisation:

An establishment where business activities are been carried out for gainful purposes.

Diamond :

A precious stone, causally colourless of great value and hardness.

Diamond Bank:

A bank owned and controlled by individual where customers kept their money for future purposes.

Industry:

The making or production of things in the factories.

Finance:

The money use or needed to support an activity , project work, companies, firms , and schools etc.

Security Analysis:

It is the initial phase of portfolio management which involves in the evaluation and analysis of risk return features of individual securities.

Portfolio Analysis:

This is refers to as group of securities that are kept together as an investment investors that make investment in various securities to diversity the investment to make it risk averse.

Portfolio Selection:

During this phase portfolio is selected on the basis of input from previous phase portfolio analysis. But the main target of the portfolio selection is to build a portfolio that offer highest returns at a given risk. And portfolios that yield goods returns at a level of risk are called efficient portfolios.

Portfolio Revision:

It is a process of buying new securities and selling the existing securities.

Portfolio Evaluation:

It is the regular analysis and assessment of portfolio performances in terms of risk and return over a period of time.


Chapter Five


5.O Summary, Conclusion And Recommendations.

This chapter emphasizes on the summary of general findings, concludes what we have been discussing about -PORTFOLIO MANAGEMENT IN DIAMOND BANKS, and also makes some relevant recommendations that can yield positive results to Diamond Banks, and also aimed at summarizing the whole project and providing a solution on ways of managing investment and loan portfolio effectively and efficiently by banks.


5.1 Summary

The study revealed that the Diamond Banks have specialized investment department that were specially established to take care of their investment functions.

The general managers headed this investment department themselves.

The study also revealed that the main functions of the investment department are the generation of investment policies, making final decision on loan, and receiving all applications. It was observed that Diamond Banks are undertaking appraisal of loan proposals before granting loan to their customers.

The finding also indicated that the safety of the banks funds is given the highest consideration when granting loan to their clients or their customers.


5.2 Conclusion.

The study has pointed on the factors militating against efficient management of investment and loan portfolio in Diamond Banks.

The researcher believes that this study will be of great value to banks in Nigeria especially Diamond Banks.


5.3 Recommendations.

Based on the findings of the study, the following recommendations are made to enhance the management of loan portfolio in Diamond Banks in Nigeria;

It is recommended that the investment department in Diamond Banks should enlarge their activity, which implies that they should not only be restricted to generating investment outlet in order to enhance the profitability of the bank.

The Diamond Bank should reduce the security they demand form customers; rather they should be in position to encourage borrowers to achieve their goal or objective. Once a projects is identified and all the conditions for a good feasibility study are satisfied, the banks should go into a kind of relationship or joint venture with the customer, open agreement and see that such project is executed.

It is also recommended that the Central Bank of Nigeria that is, the (CBN) should be significantly autonomous and well equipped to regulate the banking sector. It will be advisable that qualified and competent personnel should be allowed to undertake the job in the banking industry.

It was discovered that Diamond Banks monitor implementation of project to ensure that the purpose for which the loan was approved is adhered to and Diamond Banks adhere strictly to the four canons of lending – CHARACTER, CAPACITY, CAPITAL AND CONDITION before loans are approved.

Diamond Banks enforce realization of securities when customers default and they must comply with the Central Bank of Nigeria (CBN) guidelines in the allocation of loan in the various sections of the economy.


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