ASSESSMENT OF PROFITABILITY DETERMINANTS IN NIGERIAN BANKS

Ibrahim Abdullahi

Abstract


Performance of financial institutions including Deposit Money Banks (DMBs) has substantial consequences on capital allocation, firm expansion, industrial growth and economic development. Therefore, efficiency and profitability of banks are of interest not just at the individual bank level, but also is important at a broader macroeconomic level. The problem that motivated the study was the observation of fluctuating profits and sometimes losses in some banks. The study was restricted to listed Nigerian deposit money banks from 2006-2016. The study adopted an ex-post facto research design using panel regression analysis and ordinary least squares to explain the relationship between the research variables. Eleven years panel Secondary data from CBN statistical bulletins, NGE and SEC reports and individual bank’s books were used for the study. From Random Effects Model of the analysis, the study found a positive and significant relationship between Bank size and Return on Assets, negative and significant relationship between loans and return on assets, positive and non-significant relationship between deposits and return on assets, and positive and significant relationship between Interest and Return on Assets of the sampled Deposit Money Banks (DMBs). Based on the findings, this study recommends that the banks should work on increasing their size, efforts should be made to improve the nature of loan practices by reducing loan defaults to the minimum, remain indifferent about their deposit policies and maintain their interest rate policies.


Keywords


Deposit Money Banks, Size, Loans, Deposits, Interest Rates, Profitability

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References


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