This study examined the effect of credit risk management on the financial performance of Deposit Money Banks in Nigeria. Specifically, it analyzes the impact of Non-Performing Loans (NPL), Loan Loss Provision (LLP), and Capital Adequacy Ratio (CAR) on Return on Assets (ROA). The study used secondary data from 2014 to 2023 and applied Panel Ordinary Least Squares (OLS) multiple regression for analysis. The findings reveal that NPL has a negative and significant effect on ROA, with a coefficient of -0.031054, a t-statistic of -2.954064, and a p-value of 0.0044. This means that an increase in NPL reduces bank profitability. LLP has a positive and significant effect on ROA, with a coefficient of 0.006245, a t-statistic of 6.092986, and a p-value of 0.0000, showing that higher loan loss provisions improve financial performance. CAR also has a positive and significant effect on ROA, with a coefficient of 0.031904, a t-statistic of 2.189893, and a p-value of 0.0321, indicating that banks with higher capital adequacy perform better. The model explains 44.44% of the variation in ROA, as shown by the R² value of 0.444412. The F-statistic of 12.99828 and its p-value of 0.000000 confirm that the overall model is statistically significant. This study contributes to knowledge by examining these three credit risk factors together, filling gaps in past research. The findings provide valuable insights for bank managers, regulators, and policymakers on how to improve bank stability and profitability through better credit risk management.
Keywords: Capital Adequacy Ratio, Credit Risk Management, Deposit Money Banks, Financial Performance, Loan Loss Provision, Non-Performing Loans, Return on Assets
