Aug 2026· Journal of Accounting and Financial Management· 0 citations
Abstract
This study investigated the relationship between the upside potentials inherent in credit risk and
the performance of deposit money banks (DMBs) in Nigeria. While credit risk is traditionally
perceived as a threat to banking stability, emerging evidence suggests that it can also present
opportunities for enhanced profitability if effectively managed. The study obtained data from the
Nigerian Deposit Insurance Corporation where credit risk proxied by the ratio of non-performing
loans to total loans (NPLTL) and average liquidity ratio (ALR) as explanatory variables, whereas
return on assets (a proxy of bank performance) as dependent variable, spanning from 1990 to
2023. The Autoregressive Distributed Lag (ARDL) model was employed to estimate the models.
Findings indicate that the ratio of non-performing loans to total loans and advances (credit risk)
significantly affects bank return on assets, a proxy for deposit money banks' performance, whereas
the average liquidity ratio has no significant impact on return on assets. From the findings, Deposit
money banks should adopt a dynamic credit risk management practice; flexible risk management
frameworks that allow them to exploit profitable lending opportunities while controlling potential
losses, among others. The study contributes to the literature on the credit risk-bank performance
nexus, given the ever-changing dynamic economic environment faced by Nigerian banks.
This study examines the impact of Total Bad Debts (TBD) on the performance of deposit money
banks in Nigeria. Total bad debts, which represent unrecoverable loans, remain a critical indicator
of credit risk and a major challenge to bank profitability and financial stability. The study adopts
a longitudinal research design using secondary data obtained from the financial statements of
eight (8) selected deposit money banks in Nigeria over a nine-year period spanning 2014–2022.
The analysis employs the Panel Autoregressive Distributed Lag (ARDL) model to evaluate the
relationship between total bad debts and bank performance, measured by Return on Equity (ROE).
Findings from the descriptive statistics reveal that banks experienced relatively low and unstable
profitability alongside high levels of bad debts during the study period, indicating significant
exposure to credit risk. The regression results show that total bad debts have a negative and
statistically significant effect on bank performance, with a coefficient of -18.66743 and a p-value
of 0.0014. This implies that an increase in total bad debts leads to a substantial decline in return
on equity. Although the correlation analysis indicates a weak positive association between TBD
and ROE (0.03546), further analysis confirms a significant inverse relationship, suggesting that
rising bad debts ultimately reduce profitability. The study concludes that total bad debts
significantly and negatively affect the performance of deposit money banks in Nigeria. It
recommends that banks strengthen credit appraisal and monitoring systems, adopt effective loan
recovery strategies, and implement robust credit risk management practices to minimize bad debts
and enhance financial performance.
S. Gurowa· International Journal of Eco...· 0 citations
This study investigated the relationship between credit management and performance of deposit
money banks in Nigeria. In specific terms the study x-rayed the various credit policies used by the
monetary authorities to curtail incessant loan delinquencies and its resultant effect on the
performance of deposit money banks in Nigeria. Data for empirical analysis were sourced from
the Nigerian deposit insurance corporation spanning from 1990 to 2023. Error Correction
Mechanism model was employed to estimate the various models specified. It was found among
others that changes in non-performing loans (credit risks) negatively but significantly impacted
on changes in bank performance in the long run. Changes in average liquidity ratio in the long
run process negatively but insignificantly affected changes in bank performance. The researchers
recommend among others that the monetary authorities should intensify their regulatory as well
as their supervisory role as it concerns the reduction of the volume of bad loans granted by banking
system in Nigeria. Therefore, there is need for the Nigerian government to prioritize credit
management, particularly in the deposit money banks to foster sustainable performance.
Ogechi Blessing Nwakodo· International Journal of Eco...· 0 citations
The profitability of a country’s banking sector is a critical indicator of its overall economic health. This study examines the impact of financial risk on the performance of the banking sector in India, with a specific focus on identifying the moderating factors that influence this relationship. Using data from 26 Indian banks listed on the stock exchange from 2012 to 2023, the research employs fixed effects regression to investigate the relationship between financial risk and performance. Return on assets (ROA) and return on equity (ROE) were used as the key indicators of financial performance. The independent variables include credit risk (CR), capital adequacy ratio (CAR), liquidity risk (LR), loan-to-deposit ratio (LDR), interest rate risk (IRR), and market risk (MR). The results indicate a significant effect of financial risk on the financial performance of banks, with varying levels of significance at different risk levels. Furthermore, moderated regression analysis was applied to examine the effect of various macroeconomic and bank-specific moderating factors on the association between financial performance and financial risk. The findings provide valuable insights into the risk-performance dynamics within the Indian banking sector.
Harsha Motyani, R. Kothari· International Journal of Ban...· 0 citations
Recent structural change, regulatory capital requirement related adjustment by Nepal Rastra bank, and rising assets quality concern of lending portfolio have shaped bank profitability. In this regard, there is great concern with credit management and performance of banks. Applying descriptive and causal research design and utilizing the annual reports data of ten commercial banks in Nepal for the fiscal year of 2076/77 to 2080/81 B.S., the aim of this study is to establish the dynamic relationship between credit risk and performance of commercial banks in Nepal. The study used panel data regression techniques. The appropriate model is selected on the basis of Redundant Fixed Effects Tests, Correlated Random Effects - Hausman Test and omitted Fixed Effect model. The findings of this study reveal that credit risk negatively impacts the financial performance of commercial banks in Nepal. Non-Performing Loans (NPL) and total Loan Loss Provisions (LLP) have a negative impact on both Return on Assets (ROA) and Return on Equity (ROE), implying that low-quality assets can pose serious risks to banks' financial performance. Likewise, Capital Adequacy Ratio (CAR) has a positive impact on the financial performance of the bank, implying that well-capitalized banks tend to achieve high performance levels. An increase in the Loan-to-Deposit Ratio (LDR) reduces ROA due to increased credit risk, and LLP has the most adverse effect on the profitability indicator ROE. Therefore, the study concludes that effective credit risk management is crucial for enhancing the financial performance of commercial banks in Nepal. The results provide valuable insights for bank management, policymakers, and regulators to formulate strategies that balance risk and return for sustainable banking performance.
L. Adhikari, Pitambar Sapkota, Sandip Paudel et al.· Janabhawana Research Journal· 0 citations
Bank size remains an important but unsettled determinant of bank performance, particularly in a financial system shaped by consolidation, digitalisation, and changing regulatory requirements. This study examined the impact of equity capital, bank size, loan assets, and deposit liabilities on the performance of selected Nigerian Deposit Money Banks, measured by return on assets. The analysis focused on five Tier-1 banks and used quarterly panel data covering 2014Q1–2024Q4, yielding 220 bank-quarter observations. Descriptive statistics, correlation analysis, conventional static panel estimators, and diagnostic tests were applied. Following evidence of heteroscedasticity, serial correlation, and cross-sectional dependence, the Panel-Corrected Standard Errors estimator was used for the principal regression analysis. The results show that equity capital has a positive and statistically significant relationship with return on assets (coefficient = 1.2312, p < 0.01). Bank size has a negative and statistically significant relationship with performance (coefficient = -4.5039, p < 0.01), while loan assets (coefficient = 1.3261, p < 0.01) and deposit liabilities (coefficient = 2.9369, p < 0.01) are positively associated with return on assets. The model explains approximately 70.35% of the variation in return on assets. The findings indicate that expansion in asset size alone is not associated with improved performance and that capital strength, credit intermediation, deposit mobilisation, and efficient resource management remain important to the performance of the sampled banks.
O. G. Obisesan, James Duru· Asian Journal of Economics B...· 0 citations
This study investigates the relationship between non-performing loans (NPLs) and the
profitability of deposit money banks in Nigeria, specifically focusing over a 15-year period from
2009 to 2023. The primary objective is to assess how NPLs impact the bank's profitability, with
sub-objectives examining the effect of non-performing loan ratio, growth rate, and coverage
ratio on return on assets (ROA). The research employs a quantitative approach, utilizing
secondary data sourced from Deposit Money Banks annual reports to analyze trends and
correlations. Data collection involved extracting relevant financial metrics from Deposit Money
Banks annual reports, including non-performing loan figures, total loans, loan loss provisions,
net income, and total assets. The study employs descriptive statistics, correlation analysis, and
regression models to examine the relationships between variables. The findings reveal that while
non-performing loan ratio and coverage ratio significantly influence ROA, the growth rate of
non-performing loans does not show a strong correlation with profitability. The correlation and
regression analyses indicate that higher non-performing loans correlate negatively with ROA,
suggesting that increasing NPLS adversely affect profitability. The study recommends that
Deposit Money Banks enhance its risk management strategies to mitigate the negative effects of
non-performing loans on profitability. It also suggests that regulators enforce stricter guidelines
for loan provisioning and risk management to safeguard financial stability. Additionally,
investors are advised to carefully monitor banks' non-performing loan metrics when making
investment decisions. These measures aim to improve financial performance and stability within
the banking sector. This research contributes valuable insights into the dynamics of loan
management and profitability in the Nigerian banking sector, offering practical
recommendations for improving financial health and performance.
Samuel Dibiah· IIARD INTERNATIONAL JOURNAL...· 0 citations