Portfolio management and its impact on profitability level of bank in nigeria (a case study of first bank of nigeria plc)

Thesis Overview

<p> <b></b></p><p><b><b>&nbsp;INTRODUCTION</b></b></p><p><b><b></b></b></p><b><b><p><b>1.1<br>BACKGROUND OF THE STUDY</b></p><p><b></b></p><b><p>The first bank as a commercial bank is a profit making organization<br>it’s objective include profit maximization, maximization of earning per share<br>and maximization of share price through increase virtual banking and other programmers.<br>The level of achievement of there objective is essentially a measure of<br>business efficiency.</p><p>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; The<br>need therefore arises for the first bank to rigorously pursue it’s goal by<br>making effective use of all the resources at it’s disposal. Hence it has become<br>ever more important in recent time due to the general economic downtown and<br>sector by the government for the banking to move from one sphere into other<br>areas of commerce and industry which are deemed to be profitable as asset<br>portfolio adequately meet this needs.</p><p>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; However,<br>it should be noted that it is folio but rather, it is mandatory that the<br>organization aims at working with the optimal combination of investment and the<br>financing thereof which would produce the desired result, and this calls for<br>effective management.</p><p>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; Bearing<br>in mind that investment induces the killing of an option; the option of<br>productivity investment at any time in the future, the manager of the portfolio<br>should exercise adequate skill and caution an efficient and effective manager<br>would take into consideration. The high volatile and unpredictable nature of<br>the money and capital markets in working out an investment policy and such<br>policy should in be highly flexible so as to absolute the disadvantage by<br>changes in government fiscal and monetary policies.</p><p><b>1.2<br>STATEMENT OF THE PROBLEM</b></p><p><b></b></p><b><p>The following which constitute the research question, stand at the<br>heart of the research problems.</p><p>1. &nbsp; &nbsp; To what extent do first ban assets manager portfolio<br>theory in practices?</p><p>2. &nbsp; &nbsp; How does assets portfolio diversification reduce risk<br>in an empirical situation?</p><p>3. &nbsp; &nbsp; What factors actually determine the investment mix<br>that reduces risk taking into account the Nigerian situation?</p><p>4. &nbsp; &nbsp; How difficult is portfolio management in practices?</p><p>5. &nbsp; &nbsp; &nbsp;How<br>what extent does first bank participate various market, the money and capital<br>market the real estate sector e.t.c</p><p>6. &nbsp; &nbsp; Does management of bank portfolio requires a financial<br>expert?</p><p><b>1.3<br>OBJECTIVE OF THE STUDY</b></p><p><b></b></p><b><p>Portfolio management and its impact on profit ability<br>level of banks in Nigeria<br>is therefore a venture that requires adequate skill (s) and intellectual<br>application gained through experience and bank practices. However there is one<br>great asset of portfolio management which is a special note and this is the<br>ability of portfolio managers to significantly reduce risk through<br>diversification.</p><p>The following objective comes to mind in the choice of<br>the topic:</p><p>1) &nbsp; To determine to what extent portfolio management<br>theory is applied in practice by first bank in the assets portfolio management.</p><p>2) &nbsp; To determine the similarities and the difference in<br>the portfolio management strategies between the banks.</p><p>3) &nbsp; To determine the relative importance of effectively managed<br>assists to first bank operational to absolve the disadvantage created by change<br>in fiscal and monetary policies.</p><p><b>1.4 SCOPE<br>OF THE STUDY</b></p><p><b></b></p><b><p>It is intended in this study to appraise thoroughly the theoretical foundation<br>on which the actual practice of assets portfolio management and it impact on<br>the profitability level of banks in Nigeria is built in order to be acquired<br>with the basic factors about investment markets, price movement and firm<br>analysis, previous works on the theory of assets portfolio management and its impacts<br>on profits level will be looked upon extensively. The researcher will examine<br>the extent to which the practice agree with theory portfolio management as far<br>as marking investment decision is theory concerned, establishing the objective<br>of the bank investment policy, formulation of flexible policies and strategies<br>delegation of authority and control etc.</p><p>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; Also to<br>consider is the impact of assets portfolio on the operational results of the bank<br>which includes the effectiveness of bank management, by measuring actual<br>performances of the department against the set goals and measuring equally the<br>return on investment against the system of portfolio in the bank.</p><p><b>1.5<br>SIGNIFICANCE OF THE STUDY</b></p><p><b></b></p><b><p>Considered against the induction that the first bank obligation in<br>terms o f maximized profits and maintainers of adequate liquidity level it’s<br>highly significant that this is carried out to ascertain how the first bank<br>effectively apply the principles of portfolio <br>management in actual practices in<br>order to maximize optimize profit within its liquidity constants and safety.</p><p>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; In<br>other words, the significance of the study it to examine the assets portfolio<br>management and its impact on profitability level in first bank in order to<br>determine how first bank can enhances their portfolio management and the level<br>of profit earning capacity. Knowing fully well of the unavailable conflict<br>between necessary liquidity and desired profitability.</p><p><b>1.6<br>STATEMENT OF RESEARCH HYPOTHESIS</b></p><p><b></b></p><b><p>The following are statement of research hypothesis which are subject<br>to empirical validation.</p><p>(i) &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; <br>Ho: central bank<br>of Nigeria<br>regulations on first bank affects banking sector participation in the capital<br>market.</p><p>(ii) &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<br>Hi: central bank<br>of Nigeria<br>regulation on first bank does not effect banking sector participation in the<br>capital market.</p><p>(iii) &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<br>Ho: the first<br>bank portfolio management are not applying management theory to satisfaction.</p><p><b>1.7<br>METHODOLOGY OF RESEARCH</b></p><p><b></b></p><b><p>In this research study secondary data was used for the analysis there<br>are data collected from first bank instrument such as journals manuals and<br>newspapers publication accounts of the relevant literatures (s) like the<br>central bank of Nigeria of Nigeria publication e.t.c</p><p>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; Primary<br>data is also used: and these &nbsp;following<br>methods were used for the data analysis.</p><p>1) &nbsp; Personal interview was held with member staff of first<br>bank plc (Benin<br>and Ekpoma Branch.)</p><p>2) &nbsp; Questionnaires were issued out to various experts in<br>the field of financial management and portfolio management.</p><p>The data analysis techniques of questionnaire and<br>presented in tabular format. Also analyzed by using simple percentages for<br>ordinary questions and ch-square for the hypothesis validation.</p><p><b>1.8<br>LIMITATION OF STUDY</b></p><p><b></b></p><b><p>With the view of carrying out such a study in an academic<br>environment, some constraints actually hinges or limit portfolio management &nbsp;the extent to which the research work should<br>be been carried out they are:-</p><p><b>FINANCE:</b>&nbsp;much fiancé was expended on transportation to get<br>data needed for the research study.</p><p><b>TIME:</b>&nbsp;time was not available enough to carry out this<br>research work. Knowing fully well of the stress it imposes, combining academic<br>personal routine and distance altogether. Time / inadequate for the research.<br>Also in addition lots of time and money were been wasted while searching for<br>data moist available are inconsistent with the current guideline issued by<br>monetary authorities as reform pervades the banking sector.</p><p><b>1.9<br>ORGANIZATION OF THE STUDY</b></p><p><b></b></p><b><p>In order to achieve an orderly presentation of this work, the study<br>is divided into five chapters</p><p><b>Chapter one</b>&nbsp;deals with introductory aspect of research work a<br>general historical background of the first banks operation in Nigeria since<br>1894.</p><p><b>Chapter<br>three </b>deal with the research methodology<br>adopted together with the research of the tested hypothesis.</p><p><b>Chapter &nbsp; &nbsp; two</b><br>focuses on the exiting literature review. Which forms the background for practical<br>assets portfolio management and it’s impact on profitability level of banks.</p><p><b>Chapter<br>five </b>deal with the summary conclusion<br>and the recommendation of the project essay.</p><p><b>1.10 DEFINITION<br>OF TERMS</b></p><p><b></b></p><b><p>In order adequately comprehend the content of this research work some<br>key terms are defined as follows:</p><p><b>Primary market:</b>&nbsp;A market in which an investor purchases an asset<br>directly firms the issue of that asset. The purchase of newly issued share of cooperate<br>stock.</p><p><b>Secondary<br>market:</b>&nbsp;A market in which an<br>investor purchases an assets form an investor rather than assuring cooperate<br>firm.</p><p><b>Reserves<br>requirement:</b>&nbsp;Percentage of<br>bank and its balance stipulated by central bank and its particularly effective<br>for sterilizing excess liquidity in the banking system through which CBN can<br>contrast or expand the money supply.</p><p><b>Diversification:</b>&nbsp;Is an abetment strategy to reduce risk by selecting<br>securities in different companies or industries. Portfolio effect: the effect<br>obtained when assets are combined into portfolio the interaction of the assets<br>can provide risk reduction such the portfolio standard deviation may be less<br>than the standard deviation of any single assets in it.</p><p><b>Capital<br>assets pricing model:</b>&nbsp;A model by<br>which assets is valued based on their risk characteristic. It allows for<br>viewing the possibility of any assets of superior investment opportunity by<br>combining some position of risk free assets with the efficient fiotier.<br>Efficient potolio: a portfolio combine assets so as to minimize standard<br>deviation for a given level of return.</p><p><b>Efficient frontier:</b>&nbsp;a set of portfolio of investments in which the investor<br>received minimum risk for a given level of return.</p><p><b>Capital<br>market line:</b>&nbsp;Capital market<br>line is a graphic representation of the range of risk and returns with various<br>portfolios of assists.</p><p><b>Liquidity:</b>&nbsp;the capacity of an investment to be returned for cash<br>in short period of time with a mimumum capital loss.</p><p>Profit obtaining an advantage or benefits from a<br>venture or Endeavour.</p><p><b>Commercial<br>paper:</b>&nbsp;this is the bank that the<br>public in terms of acceptance of deposit provision of ban/overdraft management<br>of business on behalf of the owner in some and offering of advices for present<br>and potential. Investors</p><p><b>REFERENCES</b></p><p>ANAO, A.R and<br>Little H.I (2010). The Nigeria<br>stock exchange market in operation merome Elaideo and Associate Lagos.</p><p>Hirf G.A Block S.B<br>(2010) Fundamental Investment management strategy McGraw Hill Books company USA.</p><p>Iganice B.O (2014)<br>contemporary issues in money and the Nigeria<br>finace system armfitop books Nigeria.</p><p>Nwankwo G.O (2017)<br>the Nigeria<br>financial system balingh stock Macmillan London.</p><p>Ojo AJ and<br>Adequmi.W (2016) Banking and finance in Nigeria Graham sourn London. &nbsp; &nbsp;<br>&nbsp; &nbsp;</p></b></b></b></b></b></b></b></b></b></b></b></b> <br><p></p>