THE LIQUIDITY AND PROFITABILITY MANAGEMENT IN COMMERCIAL BANK

 CHAPTER ONE

INTRODUTION

• BACK GROUND OF THE STUDY

A commercial bank is an economic unit which main goal is to maximize profit. Every bank attempts to structure its asset and liabities in such a manner as to field the lightest returns subject to some constrain.

When customer deposit money with a bank they are lending the funds to the banks for a specific or indefinite period of time pending on the contract signed with bank. The customer can deposit and withdraw funds at short notice or without notice depending on the type of account being operated.

Bank however knows from experience that on average. Only a small proportion of the funds by the bank depositor at any given to me the bulk of the profit made by the bank arise from those simple transaction. i.e. the different between the cost of funds deposited by customers and the change on loan to customers.

Generally depositors are paid lower rate of interest when compared with the rate charged on loan. In addition bank also invest their surplus funds in short. medium and long term securities what makes the task of asset selected difficult is the need.

The management of funds in commercial bank or banking is considered liquid if it has adequate resource of liquidity instrument which include asset they are readily sealable without materials loss in advance of maturity

1.1   STATEMENT OF RESEARCH PROBLEM

As a result of depositing Money into the bank by customer which can be withdraw at short notice or without notice and the lending of money intending borrower has posed a problem of how can the bank maintain profitability and liquidity at the same time.

The problem arise due to the fact that bank would like to make profit to cater for its obligations as well the be up doing with the demand of customers who deposit saving having the expectation of withdraw when need arises.

As a result of the a aforementioned situation there is need to extensively find out how banks were able to meet up with  their obligation

1.2   RESEARCH QUESTION

1 What is the average rate of withdraw by deposition per        mouth?

2 What is the payback period and debit collection period of    loans granted to borrow?

3      what is the rate of interest on saving?

4      What is the interest on loan?

1.3   OBJECTIVE OF STUDY

`Because of the importance of the subject matter (profitability and liquidity management) to the efficiently continuity and evaluation of commercial bank management, the following are objectives of the study.

1. To improve the management of commercial bank the essence of profitability and management
2. Evaluating the extent to which profitability and liquidity affect other element of bank management
3. To gone way for more analysis by study future of the
4. To evaluate the existing theories with contemporary and
5. To identify various component of profitability and

1.4   SCOPE OF THE STUDY.

        In order for this study to be very meaningful, this study therefore will be limited to basic principles applicable in liquidity and profitability management in commercial banking system using Union Bank of Nigeria Plc, Head Office Marina Lagos as a case study.

        This study will also look into the component of profitability and liquidity of commercial banking management glance via through treasure management.

1.5   SIGNIFICANCE OF THE STUDY

        The finding would be of immense benefits to the bank, depositors on customer’s borrowers and the nation a whole. The research would give relevant information to economic planning team on which sector and area that requires attentions for economic development because the interest rate of lending and minimum capital base of commercial bank determines the economic growth.

The finding aids the commercial bank on how to cushion the effect of low liquidity and maintaining of high profitability.

        In conclusion, it will serve as a term of reference for further researchers.