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Risk manage presentation
1.
2. THE IMPACT OF CREDIT RISK MANAGEMENT ONTHE
COMMERCIAL BANKS PERFORMANCE IN NIGERIA
Idowu Abiola and Samuel (2014)
3. o 7 Commercial banks of 7 years data
o The panel regression model was used
o DependentVariables: ROA and ROE
o Independent Variables: NPL and CAR
......The findings revealed that credit risk management
has a significant impact on the profitability of
commercial banks’ in Nigeria.
4. o Health of financial system and country’s
economic development
o Company financial performance is the basis of
generating new resources
o Banks and its Risks i.e. Credit Risk, Interest Rate
Risk, Liquidity, Market and Solvency Risk etc
o Risk Management in Commercial Banks
5. o To examine the relationship between
performance (ROE, ROA) and the non–
performing loans of banks in Nigeria
o To establish the relationship between
performance (ROE, ROA) and capital
adequacy ratio of banks in Nigeria
6. o Ho1:There is no significant relationship
between performance and the NPL of banks
in Nigeria.
o Ho2:There is no significant relationship
between performance and the CAR of banks
in Nigeria.
7. o Quantitative analysis of 7 large customer base
Nigerian commercial banks are taken as a
sample (7 out of 20 banks, 35% population)
o 7 years annual data are taken as a sample
(2005-11)
o Loans and advances, non-performing loan,
total deposits, profit after tax and total assets
of the sampled banks were used
8. o ROA = Profit before tax /Total Assets
o ROE = Profit after tax / Equity
o NPL (Non-performing Loan) = NPL is the
total losses of commercial banks i at time t
o CAR (Capital Adequacy Ratio) = CAR is
regulatory capital requirement which is
measured as shareholders’ fund divided by
total assets
9. o DependentVariable = ROA and ROE
o IndependentVariable = Non–Performing
Loans (NPL) and CapitalAdequacy Ratio
(CAR)
10. Table-3.Panel Regression Results (Fixed Effect)
Net Profit Coefficient Standard Error T P>/t/
NPL 9521.82 .8011396 8.74 0.000
CAR 7.0048 90125.3 1.06 0.294
CONS 99239.06 34477.84 2.88 0.007
Prob>F=0.000 Within = 0.6733 Between = 0.3440 Overall = 0.4543
11. o NPL Indicates Sign of Danger
o Theoretical Negative Relationship
o But it can also increase Profitability
12. o Theoretical Positive Relationship
o A bank with a strong capital adequacy is also
able to absorb possible loan losses and thus
avoids insolvency and failure
o Insignificant positive relationship
13. o The impact of credit risk management on the
commercial banks performance
o Due to large interest margins the NPL is
adjusted in other customers inflow
o Discourage Microenterprises from accessing
loans from commercial banks
o While large firms also difficult to repay
exorbitant interest rates (loan-losses high-
interest cycle’ phenomenon)
14. o Sound and competent credit risk
management should be use
o Competent Staff
o CapitalAdequacy ratio correlation
o Regulatory authority should also pay more
attention on their prudential guidelines
