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EFFECT OF PORTFOLIO MANAGEMENT ON THE FINANCIAL PERFORMANCE OF THE BANKING INDUSTRY IN NIGERIA CASE STUDY: NIGERIA DEVELOPMENT BANK
ABSTRACT: Portfolio management in banking industry plays a crucial role in finance. Banks take savings from small and large depositors, make loans, operate payments systems, and provide a mechanism for the transmission of the monetary policy. Although portfolio management has been widespread in practice for decades with its effect on financial performance, academia has been surprisingly indifferent towards the topic, as the number of publications in the past decades dealing with the subject is limited and contradictory (Alaaeddin & Mohmmad, 2015). The general objective of this study is to analyze the effect of portfolio management on the financial performance of the banking industry in Nigeria. While specific objective is to analyze the effect of risk diversification on the financial performance of Nigeria development bank; to determine the effect of asset rebalancing on the financial performance of Nigeria development bank and to assess the effect of asset allocation on the financial performance of Nigeria development bank. The findings of this should enable management of banking institutions come out with realistic policies for portfolio management aimed at improving the quality and performance of their institutions. The researcher will use a correlational research design. The population under study was comprised of 80 employees of Nigeria Development Bank. The sample size of the study was 79 people. The study population was stratified into strata (groups) according to the departments. From these strata, the researcher used simple random sampling method as these enabled the study to select respondents who could provide the information needed for the study. The types of data that were needed in this study were primary sources of data. The types of data to be analyzed were collected by use of questionnaires and interview. The data were analyzed using inferential statistics, such as Pearson correlational and multiple linear regression analysis to determine the relationship between the variables and the degree to which the independent variable explain the variation in the dependent variable. Where SPSS version 16 was used in this study as statistical tool. The data were presented in form of tables. The study found that there is a positive correlation and relationship between independent variables and dependent variable. This implies that there is a positive relationship between financial performance, asset allocation, risk diversification, asset rebalancing. The study concluded that, the risk of an individual asset can be measured by the variance on the returns. The risk of individual assets can be reduced through diversification. The study also concluded that diversification reduces the variability when the prices of individual assets are not perfectly correlated. In other words, investors can reduce their exposure to individual assets by holding a diversified portfolio of assets. From the research findings, portfolio management policies indeed affect the performance of commercial bank. Therefore, the management should play a critical role in delivering strategic objectives by championing best practices in portfolio management.
Key Terms: Portfolio management, asset allocation, asset rebalancing, financial performance