THE IMPACT OF CORPORATE FINANCE SERVICES ON BANK’S PROFITABILITY (A CASE STUDY OF FIRST BANK OF NIGERIA PLC)

ABSTRACT

This study review the corporate finance services as obtained in the Nigeria banking business. The major corporate finance discussed ranges from the capital market services, under which management of capital equity issue, marketing, packaging, advisory services were discussed. Add to other corporate finance services such as loan syndication, venture capital, merger and acquisition were discussed. The global perspective was used to measure the extent of development of such services and the performance of bank to determine its profitability in Nigeria universal bank as a case study. At FBN plc the following corporate finance services are seen to be in operation; project financing, capital market services, advisory service. The rates of fees chargeable were not analyzed since we could not get the transaction with corporate customers. Also the possibility of enhancing income generation and capital base transaction to the corporate customers. Finally, it is clear that a lot still need to be done in areas of innovation and regulatory requirement before banks carefully reap the benefit of corporate finance services.       

TABLE OF CONTENT

Title page                                                                                                                    i

Certification                                                                                                                ii

Dedication                                                                                                                  iii

Acknowledgement                                                                                                      iv

Abstract                                                                                                                      v                     

Table of content                                                                                                          vi

CHAPTER ONE: INTRODUCTION

1.1       Background of the study                                                                                1

1.2       Statement of the problem                                                                               1

1.3       Objective of the study                                                                                    2

1.4       Statement of research hypothesis                                                                   2

1.5       Justification of the study                                                                                2

1.6       Scope of the study                                                                                          3

1.7       Limitation of study                                                                                         3

1.8       Definition of terms                                                                                         3

CHAPTER TWO: LITERATURE REVIEW AND CONCEPTUAL

THEORETICAL FRAMEWORK                                                                        

2.1.            Introduction                                                                                                    4

2.2.            Review of related literature                                                                            4

2.3.            Concept of bank’s profitability                                                                       7

2.4.            Yardstick for measuring bank’\s performance                                                7

2.5.            Corporate finance and functions                                                                    8

CHAPTER THREE: RESEARCH METHODOLOGY                                                             

3.1.          An introduction to the chapter                                                                       10

3.2.          Re-statement of research question and hypothesis                                         10

3.3.          Research design                                                                                              10

3.4.          Description of the study population                                                               10

3.5.          Sampling design and procedure                                                                      11

3.6.          Data collection instrument                                                                              11

3.7.          Test of validity of instrument                                                                                     11

3.8.          Procedure for data analysis                                                                             11

CHAPTER FOUR: DATA PRESENTATION, ANALYSIS AND DISCUSSION 

4.1            Brief discussion of study area                                                                        13

4.2            Discussion of respondent demographic characteristics                                  13

4.3            Presentation and analysis of data based on research question                        14

4.4            Presentation and analysis of data according to hypothesis                            16

4.5            Interpretation of findings                                                                               17

CHAPTER FIVE

5.1       Summary                                                                                                         18

5.2       Conclusion                                                                                                      18       

5.3       Recommendation based on conclusion                                                           18

5.4       Suggestion for further research                                                                       27

References                                                                                                      19

Appendix(es)                                                                                                  20

 CHAPTER ONE

1.0       INTRODUCTION

            With the deregulation of the economy and the emergence of several government regulations, the traditional role of Universal Bank as providing short term finance has undergone an economic metamorphosis resulting in the granting of license by Nigeria Stock Exchange to universal bank to participate to a greater extent or length in the capital market.

And these enhance banks to go into various capital project financing through their corporate finance unit thereby erecting more profit or revenue generation.

1.1       BACKGROUND TO THE PROBLEM

The deregulation and liberalization of the banking industry in 2004 has changed the industry landscape in many aspect, prominent among the changes are: -

-                      Decrease in the number of banks

-                      Specialization in banking industry and non-bank financial institution, discount house, finance house and micro finance.

-                      Automation in banking industry, computerization and technology enhancement.

-                      Raising of minimum paid up capital to N25 billion for both universal and Merchant banks.  

The highlighted changes among other gave N25 billion paid-up capital for a degree completion resulting in innovation and product development or service development. A number of banks had been forced to patronize the capital market to source for fund in form of capital. Thus, the current wave of development of new service product become a reaction by bankers to the consciousness aroused with respect to the treatment to be met out to customer as well as the need for sound improvement on their liquidity position and capital base.

However, the new service products are directly aimed at mobilizing deposit and revenue generated through fee based transactions which are mostly directed to corporate customers. And with the target of providing a corporate finance services to corporate body with capital project through their corporate finance unit with the aim of generation more profit or income.

1.2       STATEMENT OF THE PROBLEM  

In the statement of this research work, corporate finance takes on various investment services to institutional and private investors such that these adequate services does not reduce some abnormality that may hinder the much needed profit in their operation which can be deduced from the understand:

i.                    That bank ensures the adequate collections of collateral before loan are given out.

ii.                  That bank does not operate within the aggregate limit in their finance services in order to facilitate the achievement of government social economic programme and profitability.

iii.                And that bank does not ensure correction measure or action to be taken if the borrower does not repay in accordance with the agreement as arranged.

1.3       OBJECTIVE OF THE STUDY

The examination of corporate finance service on Universal banking in Nigeria is pertinent at this time of little or no bank failure couple with government concern for stable and self reliance economy through high sustainable productive capacity, since such service provides companies with the necessary finance is for dynamic base to meet future challenges.

However, the aim of the study is to identify the corporate finance services offered by Nigeria Universal Banks as compared with banks in developed economy.

1.4       STATEMENT OF RESEARCH HYPOTHESIS

According to Kertiger, F. H Dictionary “An hypothesis is a guessed statement of a relationship between two or more variables.

The above definition serves as a guide for the research test for hypothesis

Hi:       That corporate finance management reduces the level of fraudulent practice in bank and boost profitability.

Ho:      That corporate finance management does not reduce the level of fraudulent practices in banks and hinders their level of profitability.

Hi:       There is significant correlation between the corporate finance services in reducing the level of fraudulent act and profit generation.

Ho:      There is no significant correlation between the corporate finance services in reducing the level of fraudulent act and profit generation restriction.

1.5       JUSTIFICATION OF THE STUDY

The research work is conducted mainly on corporate finance service as it relates to institutional leaders and its impact on banks profitability with little emphasis on universal banking. And to be a guide for academic excellent and to companies who are unaware of such service facilities in banks.

1.6       SCOPE OF THE STUDY

The project covered corporate finance services in universal bank but limited to those in existence presently at First Bank of Nigeria Plc.  

1.7       LIMITATION OF THE STUDY 

The study like many other studies has a share of limitation as in every human undertaken there are always constraints in achieving the set down goals in which this project is not left out. Some of these constraints include the following: -  

a.         Time Factor: - It would be generally agreed upon that carrying out research work involves a lot of time, which is not on one’s side. The available time to carry out this project is very short.         

b.         The problems of data collection and its accuracy: - It is well known fact that bank staffs are always busy during and after business hour with customers and balancing of each day account. So as a result of this questionnaire set out were not returned on time even many questions were not answer or retuned. The reason behind this might be due to the amount of secrecy as professional ethic of the job.

c.         The problems of finance to augement the effectiveness of the project.

d.         Also, the book that were available in the school library here are outdated, beside these is the lack of power supply (electricity) in the school environment for more research online.

1.8       DEFINITION OF TERMS

Corporate Finance: - This is concerned with making the provision and the use of a firm’s finance which involves the allocation of scarce capital resources among competition opportunities

Corporate Finance Services: - This is the services rendered to companies or business organization by provision them with fund to run smoothly the business usually from a bank.

Profitability: - This is the ability of the corporate finance operator to earn profit or gain to the extent that the principal sum, interest and desire profit of an advance made is repaid.

Bank: - This is an institution or financial intermediaries that offer various financial services to both individual and corporate customers 

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