BANK RISK AND PROFITABILITY OF LISTED DEPOSIT MONEY BANKS IN NIGERIA

A sound conceived lending policies and careful credit practices are essential for a bank if it is to perform its credit creating functions effectively and efficiently and at the same time minimize or eliminate the risk inherent in any extension of credit. This study examines credit risk, liquidity risk and profitability of listed deposit Money Banks in Nigeria. Profitability was used to represent return on assets while credit risk and liquidity risk were used as proxy for bank risk for the period 2011-2015. A Panel of 125 observations was used of secondary data extracted audited financial statements of the sampled banks. GLS was adopted using multiple regression as a technique of data analysis after controlling for fixed/random effects. The result shows a significant negative relationship between credit risk and profitability. On the other hand, liquidity risk is found to be positive and insignificant in predicting profitability. The hausman specification test shows a significant value of 1% which means that the panel result after controlling for fixed best suits the population as the random effect hypothesis was rejected. What left to be done is for regulators, managers and other stake holders to checkmate and control credit risk as it has a negative significant impact on profitability of listed deposit money banks in Nigeria.