Credit Risk Management: Implication for Deposit Money Banks' Performance in Nigeria (original) (raw)

The most germane risk that confronts banks is credit risk, and managing this risk well is more important for banks' success than managing any other risk. Therefore, this study looked at how Nigeria's Deposit Money Banks (DMBs) performed in relation to credit risk management. It specifically looked at how the profitability of DMBs measured by return on assets (ROA) was affected by the credit risk management proxies by loan loss provision (LLPR), non-performing loans (NPLR), and capital adequacy ratio (CAR). Five (5) DMBs were chosen at random, and secondary data was taken from the selected banks audited annual reports for the years 2011 through 2020. Descriptive statistics as well as inferential stastics were employed for the analysis. Findings revealed that NPLR and LLPR have negative and statistically significant effect on DMBs performance indicating that an increase in NPLR and LLPR will affect the performance of banksadversely. However, CAR has a positive and significant effect on banks' performance. This implies that higher CAR enhances the performance of banks. Therefore, it is recommended that that managers of Nigerian DMBs should put more efforts to the credit risk management, especially controlling the non-performing loan (NPL) by extensively assessing customers'creditworthiness before giving them loans. Also, the Central Bank of Nigeria should ensure that all DMBs in Nigeria adhere strictly to the stipulatedcredit risk management policies.

Sign up for access to the world's latest research.

checkGet notified about relevant papers

checkSave papers to use in your research

checkJoin the discussion with peers

checkTrack your impact