Credit risk management and financial performance among deposit money banks in Nigeria: A case study of Zenith Bank Plc

Michael  Ojo Oke; Olawale Isaac  Wale-Awe

doi:10.23762/FSO_VOL6_NO4_2

Published : 2018-10-05

Vol. 6 No. 4 (2018)

Credit risk management and financial performance among deposit money banks in Nigeria: A case study of Zenith Bank Plc

Michael Ojo Oke

Olawale Isaac Wale-Awe

DOI: https://doi.org/10.23762/FSO_VOL6_NO4_2

Abstract

Risk is an intrinsic attribute that is existent in virtually all fields of human endeavour. The financial environment has turned out to be extremely precarious, unstable and unpredictable by dint of defective risk management practice. In giving out credit, Deposit Money Banks (DMBs) take the risk of the loan or advances (LAD) being fully or partially lost, or of the interest-income accrued not eventually materialising. The review of empirical literature revealed a plethora of approaches to measuring the credit risks facing financial institutions. They showed that the management of risks has a positive impact on profitability. Concentrating on deposit money banks in Nigeria and using Zenith Bank Plc as a case study, the objective of this study is to show in simple terms
that risks can be represented by the LAD and the loan loss provision (LLP) made by DMBs, just as performance can be measured by the return on equity (ROE), while total assets (TAS) are included as the control variable. Using data extracted from the financial statements from 2002 to 2017 (16 years), it was established, by means of descriptive statistics and regression analysis, that loan loss provision does not exert a significant impact on profitability.

Keywords:

Risk management, credit risk, loans and advances, loan loss provision, bank performance

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Ojo Oke, M. ., & Wale-Awe , O. I. . (2018). Credit risk management and financial performance among deposit money banks in Nigeria: A case study of Zenith Bank Plc. Forum Scientiae Oeconomia, 6(4), 23–36. https://doi.org/10.23762/FSO_VOL6_NO4_2

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Michael Ojo Oke

okemike2001@yahoo.com

Affiliation:

Ekiti State University, Ado-Ekiti Niger

Bio Statement (e.g., department and rank)

Dr. Michael Ojo Oke is the Acting Head, Department of Finance, Faculty of Management Sciences, Ekiti State University. He has close to twenty years’ experience of teaching; research and community service in the
University system. His areas of interest include: Enterprises Financing; Public Sector Finance; International Finance and Management of Financial Institutions. Dr. Oke has published widely in reputable journals.

Olawale Isaac Wale-Awe

okemike2001@yahoo.com

Affiliation:

Ekiti State University, Ado-Ekiti Niger

Bio Statement (e.g., department and rank)

Olawale Isaac Wale-Awe has BSc Economics (1984), PGD Computer Science (1986), MSc Banking & Finance (2006), ACA (1989), FCA (2000). He was lecturer as well as HOD in the Department of Accounting, and Sub-Dean of Faculty, Ekiti State University, Nigeria (1996-2008). Director of Examinations, then Director of Student Affairs and later Director Membership Affairs at the Institute of Chartered Accountants of Nigeria (2008-2016). He embarked on full-time PhD programme in the Ekiti State University in 2016, and dissertation is ready for defence. He consults for Sage Education Limited and is partner in Wale Awe & Co (Chartered Accountants). He has written five books and published many articles.