Evaluation of Credit Risk Mgt on the Performance of Nigerian Banks: A Study of Selected Banks

Evaluation of Credit Risk Mgt on the Performance of Nigerian Banks: A Study of Selected Banks.

ABSTRACT

The study aims at assessing merger and acquisition as a tool for corporate restructuring. The objectives of the study are: to find out if the volume of assets of banks improved after survival strategies of restructuring were employed.

To find out how restructuring adopted by the banks have affected deposit mobilizations; to find out if the volume of loans and advances improved after adopting the restructuring strategies through sanitizing and restructuring.

To know whether profitability of banks improved as a result of mergers and acquisition strategies adopted by banks after sanitization and restructuring.

Primary sources of data collection where questionnaire was distributed to respondent which was used to test the hypothesis of the study using chi-square.

The study revealed that Merger and Acquisition is a vital tool for corporate restructuring in the  banking  organisations and Merger and Acquisition is effective in achieving corporate restructuring in the banking industry.

It is recommended that,: businesses in Nigeria should continue to employ the mergers and acquisition strategy as a tool for restructuring and reorganizing to foster growth in business in particular, the financial sub-sector of the economy should use the strategy to remain in business.

To popularize merger and acquisition as a strategic option in our economy, the government should enact a, regulatory framework for merger and acquisition to meet changing needs and international standard.

INTRODUCTION

Credit risk refers to the probability of incurring losses resulting from non-payment of loans or other forms of credit by debtors. Credit risks are faced by lenders to consumers, lenders to business, business and even individuals. Credit risks, nevertheless, are mostly encountered in the financial sector particularly banking institutions.

The biggest risk facing banking and financial intermediaries, however, remains credit risk, the risk of customer or counter party default. In between the late 1990s were years of financial boom, as the number of players increased substantially in the system.

The banks witnessed rising non-performing credit portfolios in banks and these significantly contributed to the financial distress in the banking sector. Also identified was the existence of predatory debtor in the banking system whose modus operandi involved the abandonment of their debt obligations in some banks only to contract new debts in other banks.

The increase in the number of banks over-stretched the existing human resources capacity of banks which resulted into many problems such as poor credit appraisal system, financial crimes, accumulation of poor asset quality among others (Sanusi, 2002).

The consequence was the increase in the number of distressed banks. In Nigeria, the rising cases of bank failures have also become a major source of concern for policy makers. It is not surprising to find banks to have non-performing loans that exceed 50 per cent of the bank‟s loan portfolio.

BIBLIOGRAPHY

Altunbas R.A. (2005): Mergers and Acquisitions and Bank Performance in Europe – The Role of Strategic Similarities. European Central Bank, working paper series, No.398

Anthony M.C. (1997): “Commercial Bank Risk Management; An analysis of the Process”. The Wharton school. University of Pennsylvania. Financial institutions centres.

Athanasoglou, P., Brissimis, S N., and Delis, M D. (2005): Bank-specific, industry specific and macroeconomic determinants of bank profitability‟‟. MPRA Paper No.153

Banking Supervision and Regulation (1998): “Sound Credit Risk Management and the use of Internal Credit Risk Ratings at Large Banking Organisations”, Sr 98-25. Sup September 21, 1998. Washington D.C. www.federalreserve.gov.

Basel Committee on Bank Regulation (2004): “International Convergence on Capital Measurement and Capital Standards”, BIS, June.

Basel Committee on Banking Supervision (1982): “Management of Banks‟ International Lending”, Country Risk Analysis and Country Exposure Measurement and Control. www.bis.org

StudentsandScholarship Team.