Effect of Credit Management on the Financial Performance of Selected Deposit Money Banks in Nigeria

Abstract

This study examines the impact of credit management on the financial performance of certain deposit money banks in Nigeria. The objective of the research is to determine the impact of the capital adequacy ratio and loan loss provisions on the return on assets of Guaranty Trust Bank, United Bank for Africa, and Zenith Bank from 2007 to 2022. The research used secondary data obtained from the Central Bank of Nigeria's statistics bulletin for the 2022 issue. The acquired data was subjected to analysis using panel least square regression and granger causality test. The findings indicated that the Capital Adequacy Ratio has an adverse impact on the Return on Assets of Deposit Money Banks in Nigeria, while the Loan Loss Provision also has a detrimental influence on the Return on Assets of Deposit Money Banks in Nigeria. The research finds that a decrease in the capital adequacy ratio and loan loss provisions has a beneficial impact on the return on assets of Deposit money institutions. The research suggests that Banks should conduct thorough investigations before lending in order to decrease the occurrence of loan defaults. Additionally, Banks should guarantee that the capital adequacy ratio is maintained at the lowest permissible safe level.