An Assessment of Credit Risk Management and Its Impact on Bank Performance: A Case Study of Zenith Bank Plc
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Background of the Study
Credit risk management involves identifying, assessing, and mitigating risks associated with borrowers failing to meet their financial obligations. Effective credit risk management is critical for banks to maintain profitability, ensure liquidity, and comply with regulatory standards (Adetayo & Fadeke, 2023).
Zenith Bank Plc, a leading financial institution in Nigeria, operates in a dynamic environment characterized by fluctuating economic conditions and regulatory pressures. Managing credit risk has become increasingly important, given the rise in non-performing loans (NPLs) in the Nigerian banking sector. This study evaluates the impact of credit risk management on Zenith Bank’s performance, focusing on profitability, asset quality, and regulatory compliance.
Statement of the Problem
Rising credit defaults have threatened the stability of Nigerian banks, highlighting deficiencies in credit risk management practices. Poor credit appraisal, inadequate monitoring, and economic volatility contribute to increased NPLs, affecting banks’ financial performance.
Zenith Bank Plc has implemented credit risk management frameworks, but the effectiveness of these measures in improving performance remains unclear. This study examines how credit risk management impacts bank performance, using Zenith Bank as a case study (Ibrahim & Olaniyan, 2024).
Objectives of the Study
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To assess the effectiveness of credit risk management practices at Zenith Bank Plc.
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To examine the relationship between credit risk management and financial performance.
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To recommend strategies for improving credit risk management in Nigerian banks.
Research Questions
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How effective are Zenith Bank’s credit risk management practices?
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What is the relationship between credit risk management and financial performance?
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What strategies can enhance credit risk management in Nigerian banks?
Research Hypotheses
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Effective credit risk management significantly improves bank performance.
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There is a positive relationship between credit risk management and financial performance in Zenith Bank Plc.
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Enhanced credit appraisal and monitoring reduce the level of non-performing loans.
Scope and Limitations of the Study
The study focuses on Zenith Bank Plc’s credit risk management practices and performance from 2015 to 2025. It uses financial reports, NPL data, and regulatory compliance records. Limitations include access to proprietary information and the influence of external economic conditions.
Definition of Terms
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Credit Risk Management: The process of mitigating risks associated with borrower defaults.
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Bank Performance: Indicators of a bank’s financial health, including profitability, asset quality, and liquidity.
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Zenith Bank Plc: A leading commercial bank in Nigeria.
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