Credit Risk Management and Profitability of Deposit Money Banks in Ekpoma, Edo State

Abstract

This study investigated credit risk management and profitability in deposit money banks in Ekpoma, Edo State-Nigeria. Descriptive research design was adopted in the study. The population covered all the bankers in the nine (9) Deposit Money Banks in Ekpoma-Edo State. One hundred and fifty (150) bankers were drawn as sample from six deposit money banks in the area. The two instruments used in the study include: Banks’ Credit risk Management Practices (BACRIMAP) for data on credit risk management practices and Profitability Satisfaction Inventory (PSI) to collect data on profitability indices of banks. Data were analysed with percentages (%), frequency distribution table, Mean ( ) and standard deviation (S.D) while the hypotheses were tested with Bi-variate Pearson Product Moment Correlation (PPMC) using Statistical Package for Social Sciences (IBM SPSS®). Results showed that: credit derivatives, credit Securitization, and adoption of a sound internal lending policy are the credit management strategies used in deposit money banks in Edo State. Findings further revealed that credit risk management has positive significant relationship with profitability of deposit money banks (r= .355, p<0.001). It was recommended that management of deposit money banks in Nigeria should enhance their skills in credit analysis and loan administration.

Keywords: Credit, Credit Risk Management, Profitability, Deposit Money Banks