Credit Risk Management and Financial Performance of Listed Deposit Money Banks in Nigeria

Abstract

This study examined the effect of credit risk management on the financial performance of listed deposit money banks in Nigeria. The study's timeline spans from 2013 to 2022. The population of the study comprises 14 banks out of which 9 were selected using stratified sampling technique. Credit risk management was proxy with non-performing loan (NPL), capital adequacy ratio (CAR) and Loan to total asset (LTA). Whereas performance was proxy with return on assets (ROA). The data were statistically tested using the panel regression model. The outcomes of the study demonstrated that LTA was found to have a positive and significant effect on ROA evidenced with t-stat. and p-value of (t=7.5378) and (0.0000p <0.05). Whereas CAR and NPL were found to have no relationship on ROA. This study therefore recommends that, manager should make sure that credit risk management policies are strictly and fully followed to minimize the adverse consequences of credit risk. Also, by actively managing non-performing loans, bank can take appropriate actions to minimize losses.