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