DETERMINANTS OF FINANCIAL PERFORMANCE OF DEPOSIT MONEY BANKS IN NIGERIA

This study examines the relationship between profitability and its determinants, using data collected from deposit money banks in Nigeria. The study uses aggregate data covering the period 1997 to 2011. The data were analysed using descriptive statistics, correlation and regression analysis. It is found that bank specific variables like net interest income and bank size are significant positive determinants of bank profitability. On the other hand, it is found that loan and advances and the ratio of total deposit and total liability have negative statistical significance. However, the non bank specific determinants like gross domestic product, interest rate and inflation have no statistical significance in determining the level oj profitability. Other measures like liquidity and capital adequacy have no significance in explaining the profitability of the banks. Based on the findings of this study, it is recommended that the management of the banks should strike a balance between loans and advances and the amount of the deposit by customers. As it stands, the amount of deposit is not adequately covering the loans given out to customers, therefore, resulting to ratio exerting a negative effect on the profitability of the banks