THE IMPACT OF DEBT MANAGEMENT ON THE PROFITABILITY OF THE BANKING INDUSTRY

1.0 Introduction

It is that banks never make bad loan at least they are bad when they are made. However banks find out that invariably a small portion of their loans become bad and doubtful and eventually must be written off.

This basic rick of lending function is not entirely bad; bank would be demise in not bearing such rick in the course of under writing a variety of business enterprise and customer needs. When a bank does not experience at least a few loan losses, this is likely to be a sign that the bank is passing up profitability opportunity. Never the less well managed banks should do all they can to minimize loans losses which all deduce their profitability.

Banks conduct loan review to reduce losses and monitor loan quality. Loan review consists of periodic audit of the ongoing performance of some or all of the active loans in the bank’s portfolio.

The safety of any loan or advance is of importance and paramount of the bank, banks by emphasis on the character (honest), integrity and reliability of borrowers. The company (borrowers) as a profit oriented outfits; banks expect their facilities to yield level of profit which to declare to the share holders who own the bank.

Therefore, the quality of debt management should be impresses upon.

1.1 Background Of The Study

The effect of credit risk management: it is said that banks

Never made bad loan; based on this research been conducted it was discovered that most of the problem facing Zenith Bank Nigeria plc Lokoja branch, even in many banking sector among other includes job satisfaction. It seems like the banking industry is becoming Nigeria most frustrating sector based on this finding.

We come in contract with bankers who are full of woes about their jobs, their responses are not farfetched rather then I’m just doing this job to pay the bill, I went for an interview yesterday.

Because I want to change this job. I don’t even mind the take home pay etc.

One of the problems from the warehouse include capitalist without a good knowledge of information technology and with a good knowledge of Nigeria economy manage the banking sector. Zenith bank of Nigeria plc in particular why manage information technology sake and not for the return of investment.

Therefore so much money goes for unnecessary InfoTech. Banking sector has been fined by unpaid loans and therefore lay off workers to recoup some credits from within. More money would have been made by properly managing loan form investment and generating enough return to set up the salaries of bank workers. Consequently, management of Nigeria financial institutions are faced with tremendous challenges and should brace up most of these factor that rise to this problem include credit risk and performance of Nigeria banks. This study evaluates the impact of credit risk on the profitability of Nigeria banks. This significantly contribute to financial distress in the banking sector majorly course the problem of banking sector continues to be directly related to high level of debtors regarding loans. However, banks find out that invariable, a small portion of their loans becomes bad and doubtful and eventually bad; banks would be remiss in not bearing risk.

When a bank does not experience at least a few loan losses, this is likely to be a sign that the bank is passing up profitability opportunities nevertheless well manage banks should do all they can to minimize loan losses which will reduce their profitability. Bank conduct loan review to reduce losses and monitor loan quality loans review consist of periodic audit of the going performance of some or all of the active loans in the bank’s portfolio. On 26th January, 2010 an analysis of the challenges faced by bank move on base regulating bank. The structure of Nigeria banking sector.

The basic risk in the course of under writing a variety of business enterprise and consumer needs when a bank does not experience at least a few loan losses this is likely to be a sign that the banks should do all they can to minimize loan losses which will reduce their profitability.

1.2 Statement Of The Problem

The problem that lead to credit default, how loans turn out bad are taking into consideration and its effect or impact of profitability and financial statement of banking industry. With which zenith bank of Nigeria plc branch is particularly considered.

Problem of banking sector in Nigeria is credit risk and the performance of Nigeria banking. This problem evaluate on the impact of credit risk on the profitability of Nigeria banks. However in banking sector most of the banks are not medically sound to discharge effective service that could have justify the creation and the profitability of the banking industry. Finally mismanagement of found in another crucial problem faced by banking sector in Nigeria especially zenith bank of Nigeria.

It is a result of this that the researchers decided to conduct a research on this topic in order to improve the service toward Building a viable service to our dear people Nigeria especially the people of Kogi state in particular.

1.3 Objectives Of The Study

1. To appraise the impact of debt management on profitability
2. To x-ray process of interviewing prospective lender
3. To advice lending institution [banks] to adhere to legal provision
4. To encourage the credit manager to study the business of the borrowers structurally and its nature.
5. To emphasise the need for credit managers to be well trained

1.4 Significance Of The Study

This research work will been a good benefit to all financial institution that offer credit facilities to its customers particularly zenith bank of Nigeria plc Lokoja branch, it will also be highlighting various form of collateral securities and other method of recovering back the principle as well as the interest.

It will also assist fellow students and researchers who may want to use the research work as a reference point.

The researcher aim is to identify facts about the Impact of debt management on the profitability of the banking industry, a case study of Zenith Bank Nigeria Plc Lokoja Branch.

The researcher will also suggest possible solution to the problem. The solution if taken serious will go a long way in improving the impact of debt management in zenith bank plc Lokoja branch could be used as a model for other zenith bank branch that facing similar problems.

The significance of the study is to help debt management toward areas that need re-organization in order to enhance the performance of effective realization of the management goals or objective.

The study is going to help in identify the reason behind why some creditors are more effective and why some are lacking behind.

1.5 Research Questions

These are question which the researchers intend to find answer to.

The question emanated from the topic of the problem which is to be investigated by the researchers.

1. Does debit management gain the amount of money that is lend To organization
2. How long will loan last in the hand of borrowers?
3. Does proper interview of customer protect the image of the banking industry?
4. What is course of irrecoverable debt?
5. Does bad debt affect the profitability of a banking industry?
6. What are the causes of improper security of banking industry?
7. What are the reasons why banks lend money to customers?
8. What are the reasons why banks grant credit to customers?

1.6 Research Hypothesis

Hi: Debt management has significant impact on the profitability of cooperative finance banking industry.

H0: Debt management has no significant impact on the profitability of cooperative finance banking industry

1.7 Scope Of The Study

This research work is designed to cover the credit aspect of banking industry various credit facilities offered by bank method of recovering debt and the measure to employ as curative and preventive to credit default.

1.8 Limitation Of The Study

Despite the assurance given to the researcher by the debt recovery department of zenith bank of Nigeria Plc Lokoja branch on information of bad debt the researcher was unable to lay hand on some vital or useful documents and information which are often labeled secret and confidential however the researcher had made effort to ensure that relevant information were obtained for the successful completion of this research work. More so respondent were not very cooperative as none of the willingly accepted the questionnaire in fact most of them spent between two and three days to compete it and each time the researcher appealed then it was one complain of the other such as I am preparing my branch account for conclusion in the annual report, I have a lot of file to clear, I am too busy, I have a meeting to another and several forms of complains.

1.9 Definition Of Relevant Terms

By relevant terms, the researcher mean technical language used or employed in the conduct or writing of the project which may be misconstrued or misinterpreted this going another meaning of the original intention of the researcher such key terms used in the research proposal can be defined as follow:

Banking:

According to Rajesh Goyal (2011) banking is activity of accepting and safe guarding money owned by other individuals and entities and then lending out money in order to a profit.

Debt:

Business dictionary defined debt as a duty or obligation to pay money, deliver goods or render services under an express or implied agreement ones who owners is a debtor, one to whom it is owned is a debt, creditor or lender.

Industry:

Chaise (2009) defined industry as a good of manufacturers of business that produces a particular kind of goods and services. It can also be sees as a segment of the economy involving the manufacturing and transportation of goods.

Impact:

Murray (1928) sees impact as the action of the object coming forcibly into contact with another.

Management:

Koontz and Weihrich (2003) see management as “the process of designing and maintaining an environment in which individual working together in group, efficiently accomplish selected aims”

Profitability:

Michael Harris (2008) sees profitability as the ability of a business to earn a profit. A profit in what is left of the revenue a business generates after it pay all expenses directly related to the generation of the revenue such as producing and other expenses related to the conduct of the business activities.