Credit Risk Management and Financial Performance of Selected Commercial Banks in Nigeria

Adekunle, Olusegun; Alalade, Samson Yimka; Agbatogun, Taofeek; Abimbola, Cole

doi:10.18533/jefs.v3i01.73

Cited by 21 publications

(22 citation statements)

References 14 publications

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“…In a study conducted by (Ogboi & Unuafe, 2013) on six banks in Nigeria during the period of 2005 to 2009 on the impact of credit risk management and capital adequacy on the financial performance of banks, found that the ratio of non-performing loans to total loans and advances and liquidity ratios do not significantly affect the performance of banks, while total loans and advances to total deposits have a significant negative impact on the financial performance of banks, and capital adequacy has a positive effect on the banks' return on assets. (Yimka et al, 2015) studied the impact of credit risk management on the profitability of Nigerian banks, where 10 banks were studied from 2005 to 2010 and the results were that the rate of total non-performing loans and advances to total loans and advances does not significantly affect the banks' profitability. Another study on ten Nigerian Commercial banks conducted by (Oluwafemi et al, 2014) about the impact of credit risk management on the banks' financial performance measured by return on assets (ROA) during the period 2006-2009 concluded that the non-performing loans and liquidity ratios do not have a significant impact on the Nigerian commercial banks' financial performance.…”

Section: Empirical Review and Hypotheses Developmentmentioning

confidence: 99%

“…Another study on ten Nigerian Commercial banks conducted by (Oluwafemi et al, 2014) about the impact of credit risk management on the banks' financial performance measured by return on assets (ROA) during the period 2006-2009 concluded that the non-performing loans and liquidity ratios do not have a significant impact on the Nigerian commercial banks' financial performance. (Alalade et al, 2015) examined the impact of credit risk management on the financial performance of 10 banks in Nigeria during the period of 2006-2010 by examining the relationship between both the reserve rate of non-performing loans and the rate of nonperforming loans to measure credit risk on one hand and the rate of return on assets on the other and found that credit risk management has a positive and significant impact on the financial performance of commercial banks in Nigeria. Another study by (Kolapo et al, 2012) on the impact of credit risk performance on the financial performance of 5 commercial banks in Nigeria during the period 2000-2010.…”

Section: Empirical Review and Hypotheses Developmentmentioning

confidence: 99%

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The impact of credit risk management on the financial performance of United Arab Emirates commercial banks

Zaidanin

2021

IJRBS

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The main purpose of this study is to measure up to what extent the independent factors defined by capital adequacy ratio, non-performing loans ratio, cost-income ratio, liquidity ratio, and loans-to-deposits ratio impact the financial performance of sixteen commercial banks operating in the United Arab Emirates using panel data for the period of 2013-2019. The secondary data was collected from banks and examined by applying standard descriptive statistics and the random effect model for hypothesis testing. It is concluded from the regression outcomes that non-performing loans ratio and cost-income ratio have a significant negative impact on commercial banks profitability in the United Arab Emirates, while capital adequacy ratio, liquidity ratio, and loans -to-deposits ratio all have a very weak positive relationship on the return on assets but they are not determinants of bank’s profitability due to the insignificant statistical impact on it. It is therefore suggested that to enhance financial performance and minimize the risk of non-performing loans in the future, banks must watch very carefully the loans’ performance and analyze thoroughly the clients’ credit history and ability to pay back their debts prior to any approval of loan applications. Furthermore, banks should continuously improve their assets utilization, liquidity, and techniques of managing operating costs, improve the impact of capital adequacy, and the use of deposits for lending activities from a weak positive impact to a significant positive impact on their profitability. The researchers recommend that future studies on credit risk management influence on banks’ financial performance should consider more independent variables and longer periods of study such as twenty or thirty years to have more accuracy and generalized results.

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Section: Empirical Review and Hypotheses Developmentmentioning

confidence: 99%

Section: Empirical Review and Hypotheses Developmentmentioning

confidence: 99%

The impact of credit risk management on the financial performance of United Arab Emirates commercial banks

Zaidanin

2021

IJRBS

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“…The verdicts showed that monitoring has a positive significant association with credit risk, hence a unit increase in monitoring would lead to rise in credit risk by 0.164 (β1 = 0.164, t = 1.916). In Nigeria, Adekunle, and Alalade (2015) reveal that credit risk management has significant effect on financial performance of commercial banks. This finding concur to our results that a change in risk assessment leads to upsurge in credit risk as shown by a coefficient of 0.230.…”

Section: Discussionmentioning

confidence: 99%

Internal Controls and Credit Risk Among Commercial Banks Listed in Nairobi Securities Exchange, Kenya

Agang¹,

Njoka²

2020

IJCFA

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Inappropriate credit policies, as well as inadequate, limited institutional capacity by Kenya's financial sector, led to several of the banking institutions collapsing over what was termed as poor management of credit risks which resulted to increased amounts of loans that were not being serviced. The main aim of the research project was to establish the effects of internal controls on credit risk among the banks listed in NSE. The distinctive goals included to find out the influence of internal control, assessing risk ,activities in control and monitoring among banking organizations listed in NSE. The study was guided by capital asset pricing model, agency theory and modern portfolio theory. The study adopted a casual descriptive research design. The target population encompassed the eleven listed banks in Nairobi Securities Exchange where cencus was done. Both primary and secondary data were collected. The questionnaires were applied to gather data. The diagnostic tests include multicollinearity and normality. Data was evaluated using both descriptive and inferential statistics using SPSS. The findings show that there is a positive and significant link between monitoring and credit risk. The study found that assessment of the risk has a significant way on credit risk and that internal controls that are not strong such as poor ethical values have stimulated the involvement to fraud that leads to income loss and misuse of the income received. The study concluded that risk assessment P=.000 < 0.05, control activities P=.000 < 0.05, monitoring and control environment P=.001 < 0.05 have a significant effect on credit risk among commercial banks listed in NSE. The study recommends that banks should implement proper risk assessment to guide their operations and also implement efficient control activities to guide their operations. Further, the study recommends that banks’ monitoring approaches should be guided towards effective tasks and achieving the goals of the organization. In regard to propositions for more studies, this investigation could be further advanced by looking at the effect on credit risk management in other institutions such as investment banks and microfinances. It will help in the management of credit unions, Savings and Loans Associations, investment banks and microfinances in Kenya.

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“…Empirical reviews show that studies that directly try to associate financial intermediation efficiency with financial innovation in Nigeria are scarce. Existing studies mainly focused on the effect financial innovation on the performance of commercial banks in Nigeria as well as other countries (Adele & Akanbi, 2012;Mugo, 2012;Muiruri & Ngari, 2014;Akhisar, Tunay & Tunay, 2015;Kamau & Oluoch, 2016); others focused on the effect of financial innovation on economic growth or welfare of the citizenry (Onodugo, Kalu & Anowor, 2013;Nwite, 2014;Igbanibo & Iwedi, 2015;Casadas, 2015;Ovidu, Seyed & Alina, 2015). Considering the importance of fund mobilization and allocation in economic growth and development (the core function of financial intermediation), the specific objective of this study therefore is to find out whether the use of product financial innovation-ATM, PoS, Internet banking and Mobile banking-has actually improved the efficiency of financial intermediation in Nigeria.…”

Section: Statement Of the Problemmentioning

confidence: 99%

Financial Innovation and Efficiency of Financial Intermediation in Nigeria

Chukwunulu¹,

Ibenta²

2021

African Journal of Accounting and Financial Research

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This study investigated the effect of financial innovation on efficiency of financial intermediation of commercial banks in Nigerian between 2008 and 2018. The study used secondary data obtained from the Annual reports and Accounts of the Central Bank of Nigeria (CBN). The explanatory variables of the study are the product innovations in the banking sector namely: volume of automated teller machine transactions (ATM), volume of point-of-sale transactions (PoS), volume of Internet banking transactions (IBT) and volume of Mobile banking transactions (MBT). The dependent variable is the financial intermediation efficiency proxied by interest rate spread, which is measured by the difference between maximum lending rate and savings rate. A multiple regression model developed for the study was analysed with the help of Ordinary Least Square (OLS) regression technique. The result from the descriptive statistics indicated that financial intermediation in Nigeria is inefficient. The results showed that ATM, IBT and MBT have insignificant positive effects on financial intermediation while PoS has negative effects on financial intermediation efficiency. Further results indicated that the 57% change in financial intermediation efficiency explained by financial innovation is not statistically significant. The study therefore concluded that financial innovation in itself is not a determinant of the efficiency of the intermediation process in Nigeria. It is then recommended that the regulatory authority among others should make policies to increase the savings rate, so that the surplus unit will be encouraged to make their funds available to the banks for lending.

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Credit Risk Management and Financial Performance of Selected Commercial Banks in Nigeria

Cited by 21 publications

References 14 publications

The impact of credit risk management on the financial performance of United Arab Emirates commercial banks

The impact of credit risk management on the financial performance of United Arab Emirates commercial banks

Internal Controls and Credit Risk Among Commercial Banks Listed in Nairobi Securities Exchange, Kenya

Financial Innovation and Efficiency of Financial Intermediation in Nigeria

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