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

Abstract

The study analyses the effect of credit risk on the financial performance of listed deposit money banks in Nigeria. Credit risk is a proxy for capital adequacy ratio, non-performing loan and loan loss provision, while financial performance is a proxy for return on assets. The correlational research design was used in the study. Relevant data for the study were collected from thirteen adjusted populations of listed deposit money banks actively trading on the floor of the Nigerian Exchange Group (NXG) from 2014 to 2023. So, the data collected were analysed using generalized least square (GLS) regression analysis. The findings reveal that the capital adequacy ratio had a positive effect on the financial performance of listed DMBs. Based on the findings, the study concludes that the capital adequacy ratio affects financial performance positively. Among the important policies of the study is that the DMBs formulate credit risk related policies to enhance financial performance of listed DMBs in Nigeria. It is, therefore, recommended among others, that the CBN committee on credit risk management should monitor DMB’s credit risk threshold for absolute compliance