ASSESSMENT OF ASSETS AND LIABILITIES MANAGEMENT ON THE PROFITABILITY OF DEPOSIT MONEY BANKS IN NIGERIA

Abstract

This study assesses the effect of assets and Liability Management on the Profitability of some selected Deposit Money Banks in Nigeria. The profitability of deposit money banks is vital for the smooth operation of the financial system of a country. To get a picture of the profitability of the banks, ROA, which is a measure of profitability, was employed. ROA reflects the ability of a bank’s management to generate profits from the bank’s assets and was calculated as net profit after tax divided by Total assets. A sample of ten (10) banks was selected for the study that covered a period of ten (10) years, from 2008 to 2017. A purposive sampling technique method was used in the selection of the sample. The ten Banks selected represents forty-five percent (45%) of licensed Deposit Money Banks in Nigeria and with a widespread branch network this sample is assumed to be a true representation of the quoted banks in Nigeria. The study made use of secondary data and analysis was done using correlation and panel regression analysis. The study finds that ALM position negatively affects bank profitability (ROA) (β=- 0.003, z = -0.02, p > 0.05). A unit increase in the ALM proportion necessitated by either an increase in advances or a decrease in deposits results into a decline in the ROA by up to 0.003 (0.3%). This may be explained by the possibility that the increase destabilizes the bank liquidity position and compels the bank to source for more expensive financing to fund the liquidity gaps The findings revealed that loan to customers’ deposit have significant effect on profitability of selected deposit money banks in Nigeria. Also, the results of hypothesis revealed that loans to customers have adverse effect on profitability of selected Deposit Money Banks in Nigeria. The study concluded that the asset- liability management has significant effect on profitability of Deposit Money Banks in Nigeria. Finally, the study recommends that banks need to improve credit administration, monitoring and improve on credit quality. Risks should be timely identified and mitigated in order to secure tradingfunds. It also recommends that banks should focus on improving their capital levels to improve their financial performance.