Risk Assets Management and Financial Performance of Deposit Money Banks in Nigeria

This study investigates the effect of risk assets management on the financial performance of listed deposit money banks in Nigeria. The research specifically examines the effect of three key risk asset components: total loan to deposit ratio (TLDR), non-performing loan ratio (NPLR), and capital adequacy ratio (CARR) on bank profitability, proxied by return on assets (ROA). Employing an ex-post facto research design, the study analyzed panel data from 10 listed deposit money banks in Nigeria over a 10-year period (20142023). The data were subjected to descriptive statistics and a pooled ordinary least squares (OLS) regression analysis to test the hypothesized relationships. The findings reveal that the capital adequacy ratio has a significant positive effect on bank profitability. Conversely, while the loan to deposit ratio exhibited a positive relationship and the non-performing loan ratio a negative relationship with profitability, neither of these effects was statistically significant. The study concludes that maintaining a robust capital base is a critical driver of financial performance for Nigerian banks, providing a buffer against risks and enhancing investor confidence. The insignificant effects of TLDR and NPLR suggest that Nigerian banks may have developed effective strategies to mitigate the direct impact of these credit risk factors on profitability, or that other macroeconomic and operational variables play a more dominant role.The findings recommend that bank managers should prioritize optimizing capital allocation policies to leverage the positive impact of capital adequacy while ensuring continued adherence to regulatory standards to foster long-term financial stability and performance.