EFFECT OF MANAGEMENT QUALITY, COVERAGE RATIO AND LOAN TO DEPOSIT RATIOON FINANCIAL PERFORMANCE OF DEPOSIT MONEY BANKS IN NIGERIA

Abstract

Deposit Money Banks in Nigeria play a vital role in the country's financial system, contributing to economic growth and stability. However, the financial performance of DMBs is influenced by various factors, including management quality, coverage ratio, and loan-to-deposit ratio. This study therefore examined the effect of management quality ratio, coverage ratio and loan to deposit ratio on financial performance (measured by return on assets) of selected deposit money banks in Nigeria. The study adopted a descriptive research design. The study covered Fourteen (14) listed DMBs in Nigeria and covered the period of 10 years 2012-2021. The study employed secondary data which was extracted from published annual reports and financial statements of the selected listed DMBs in Nigeria. Ordinary least square Regression analysis was used to test the hypotheses rose for the study. The study found that management quality ratio has positive but insignificant effect on ROA, coverage ratio has negative and significant effect on ROA, while loan to deposit ratio has positive and significant effect on ROA of deposit money banks in Nigeria. The study thus recommended among others that deposit money banks in Nigeria should focus on enhancing their risk management frameworks and credit assessment processes to minimize non-performing loans. By maintaining adequate provisions or reserves to cover potential losses, banks can improve their asset quality, reduce credit risk, and enhance profitability.