ABSTRACT

The main objective of this study was to determine the impact of risk asset management on financial performance of deposit money banks in Nigeria over a period of eight (8) years (2012 - 2020) for four (4) selected banks. The ex-post facto research design was used for this study. The secondary data were obtained from the financial statements of the selected banks. Descriptive statistics, panel regressions were employed and used for this study. The results of the analysis showed that there is no significant impact of loans-to-deposit ratio, Non-performing loans-to-total loans ratio on return on asset of commercial banks in Nigeria; loans-to-deposit ratio, Non-performing loans-to-total loans ratio do not have significant impact on return on equity of commercial banks in Nigeria and there is no significant impact of loans-to-deposit ratio, Non-performing loans-to-total loans ratio on return on capital employed of commercial banks in Nigeria. Based on the above findings, the researchers recommends that banks must comply with relevant provisions of the banks and other financial institutions Act (1999) as amended and the prudential guidelines. Banks should ensure proper credit evaluation of potential borrowers and lending funds should be allocated to prime borrowers; banks should be prudent in managing the loan portfolio ensuring optimal depositors contribution to total loans. Deposits are one of the major sources of loanable funds for a bank, therefore deposits should cover a significant amount of loans to avoid risk and banks should operate in alliance with top quality credit rating firms who will ensure that loan seekers are correctly rated and the potential risk of a loan proposal is brought to light.