Determinants of Deposit Money Banks’ Profitability in Nigeria

Abstract

This study examined the determinants of Deposit Money Banks’ (DMBs) Profitability in Nigeria. The study specifically analysed the relationship between Bank size, Customer Deposits, Loan and advances and tax on Profitability. The population of the study is made up of all the 24 DMBs quoted on the Nigeria Stock Exchange as at 31^st December, 2020. The study adopted a cross-sectional research design. The study used a sample of 3 DMBs for a period of 11 years ranging from 2010 to 2020. The sources of data collection was secondary data in nature and was extracted from the annual account and reports of the sampled DMBs. The study employed a Panel Regression techniques as the method of data analysis. The dependent variable is Profitability and the independent variables are Bank size, Customer Deposits, Loan and advances and tax The findings of the study indicates that a significant relationship exist between Bank size and profitability which is revealed by the p-value of 0.000. Also, customers’ deposit revealed a significant relationship with profitability which is evident from the p-value of 0.002. The results also shows that loans and advances has a significant relationship with profitability. This indicates that these three variables are determinants of DMBs profitability. While tax revealed a no significant relationship with profitability with a p-value of 0.824, indicating that taxation does not determine the profitability of DMBs profitability and this is evident from the fact that tax is always computed after profit must have been realized. The study recommends that DMBs should continually strive to increase or improve on it asset capacity which increases the size of the DMBs and also ensure that they encourage customers’ to seek for loans and advances, possibly by reducing the stringent policies or conditions associated with issuing of loans.