ABSTRACT

This study empirically investigates the relationship between credit risk management and financial performance of deposit money banks in Nigeria over the period 2015-2020, using data for fourteen banks. Return on equity (ROE) is used as a proxy for financial performance of deposit money banks, which was regressed on non-performing loans, capital adequacy ratio, loans and advances, loans loss provision, capital adequacy and loan to deposit ratio.  The panel least squares technique was specifically employed to examine the relationship.

The empirical results revealed that: Non- performing loans has a negative and insignificant impact on the performance of deposit money banks in Nigeria; Capital adequacy ratio has a positive and significant impact on the performance of deposit money banks in Nigeria; Loans and advances has a negative and significant impact on the performance of deposit money banks in Nigeria; Loan loss provisions has a negative and insignificant effect on the performance of deposit money banks in Nigeria; and there is a positive significant relationship between loan to deposit ratio and deposit money banks performance in Nigeria

 Against the backdrop of the foregoing findings, it was recommended that: In order to considerably enhance (decrease) the ratio of non-performing loans, deposit money banks in Nigeria are advised to improve their credit risk management strategies; the banking industry should develop a credit policy that is effective and reflects flexible tenure, restructuring of lending terms, and conversion; to ensure prudent use of deposits and profit maximization, management must be cautious while establishing a credit policy; among others.