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An Appraisal of Credit Portfolio Management in Corporate Banking: A Case Study of First City Monument Bank, Abuja

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Background of the Study:

Credit portfolio management is vital for minimizing non-performing loans and optimizing risk-return trade-offs in corporate banking. First City Monument Bank (FCMB) in Abuja employs sophisticated credit portfolio management strategies that include diversified lending, continuous risk assessment, and advanced analytics to monitor borrower performance. These practices are designed to balance credit risk with growth opportunities and ensure sustainable financial performance (Ibrahim, 2024). Efficient credit portfolio management not only safeguards the bank’s assets but also enhances profitability by reducing default rates and optimizing loan pricing. However, the dynamic economic environment and changing borrower behaviors present ongoing challenges in maintaining an optimal credit mix. This study examines FCMB’s approach to credit portfolio management, evaluating its effectiveness in mitigating risk and improving overall portfolio performance, while identifying areas for enhancement (Okafor, 2023).

Statement of the Problem:

FCMB faces challenges in managing its credit portfolio effectively due to factors such as economic volatility, inconsistent credit evaluation processes, and insufficient diversification. These issues can lead to an increased rate of non-performing loans and reduced profitability, impacting overall financial stability.

Objectives of the Study:

• To evaluate the effectiveness of credit portfolio management at FCMB.

• To identify challenges affecting credit portfolio performance.

• To recommend strategies for improving credit risk mitigation and diversification.

Research Questions:

• How effective is FCMB’s credit portfolio management in mitigating credit risk?

• What challenges hinder optimal credit portfolio performance?

• What measures can enhance portfolio diversification and reduce non-performing loans?

Research Hypotheses:

• H₁: Effective credit portfolio management significantly reduces non-performing loans.

• H₂: Economic volatility and evaluation inconsistencies negatively impact portfolio performance.

• H₃: Enhanced risk assessment and diversification strategies improve overall portfolio outcomes.

Scope and Limitations of the Study:

This study focuses on FCMB’s corporate banking operations in Abuja, utilizing internal credit risk data and performance reports. Limitations include external economic influences and potential data reporting constraints.

Definitions of Terms:

• Credit Portfolio Management: The process of managing a bank’s loan portfolio to balance risk and return.

• Non-Performing Loans: Loans on which the borrower is not making scheduled repayments.

• Diversification: The strategy of spreading credit exposure across different sectors and borrowers.

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