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ASSET LIABILITY MANAGEMENT AND PERFORMANCE OF LISTED DEPOSIT MONEY BANKS IN NIGERIA

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ASSET LIABILITY MANAGEMENT AND PERFORMANCE OF LISTED DEPOSIT MONEY BANKS IN NIGERIA

 

Abstract

The study examines the impact of Asset Liability Management (ALM) on financial performance of deposit money banks in Nigeria using time series annual data from 2005-2018. Data on asset liability management was proxied with loan and advance, non-performing loan, demand deposit and borrowing while performance was proxied with return on asset and return on investment. Ex-post facto research design was used for the study. Data from audited annual reports of fourteen listed deposit money banks were used and the data were analyzed using panel data regression analysis. The study found that asset liability management exerts both positive and negative effect on return on asset and return on investment of listed deposit money banks in Nigeria. It further revealed that loan and advance and bank size have positive effect on return on asset while, non-performing loan exhibit negative effect on return on asset of deposit money banks in Nigeria. The study also found that demand deposit, borrowing and bank size exerts positive effect on return on investment of deposit money banks while, increase in bank size exhibits negative effect on return on investment of deposit money banks in Nigeria. The study concludes that adequate attention must be placed on loan and advance, non-performing loan, demand deposit and borrowings of deposit money banks in Nigeria to facilitate and guarantee better asset liability management. The study therefore recommends that a comprehensive Asset Liability Management policy framework should be put in place by every deposit money banks which should be adequately driven by a very dynamic and proactive asset liability management committee (ALCO) constituted by the board with specific roles of regularly probing the appropriate mix of assets and liabilities that maximizes banks profitability so as to consistently enhance performance and create value for the shareholders.

 

Keywords:

Asset liability management, deposit money banks, return on assets, return on investment, loan and advance, demand deposit, borrowings