TABLE OF CONTENTS
Table of Contents
of Bank under Review: UBA Plc
The Role of bank in an Economy
to Bank Lending
Credit Policy in Bank
of Credit Policy in a Bank
of Acceptable and Unacceptable Loan
and Administration of Credit
for Loan Supervision
2.10 Management of Delinquent Facilities
Design and Methodology
of Research Design
Data Analysis and Interpretation
Tables and Interpretation
Testing and Interpretation
of the Interview
Summary, Conclusion and Recommendation
of the Recommendation
One of the major functions of commercial
banks is to extend credit facilities to their customers.
Lending has become a vital function in
banking operations owing to its direct effect on economic growth and business
development. Thus, a careful study and proper analysis of lending has become
inevitable to banking students, lending officers, finance manager and other
people concerned with lending activities.
It is pertinent to mention that the
principal lending objectives of a bank is to provide growth, profitability and
For any lending decision and activity to
be worth its salt, there must be enough assurance that it will lead to the
bank’s business growth in terms of an addition variety of services yielding
adequate income to the bank. In addition, it should also increase the available
quality, of bank’s loan resources.
If from the onset, the lending carries
far greater risk than what is considered to be reasonable, it is possible that
it will turn bad at a future date and therefore fail to contribute to the
bank’s loan resources quality wise.
In lending activity, the bank is
concerned with the safety of the loan since it represent the chunk of
depositors’ money and a source of income to the bank.
It is important to ensure the
profitability of the loan because no loan is attractive, if the expected income
is less than the average cost of the borrowed fund. “In the Nigeria
situation, where there is still competition for deposits particularly among the
corporate clients, sometimes at incredible rates, lending decision must achieve
a reasonable degree of return, and therefore, lending officers normally prefer
proposals with a variety of income sources like foreign business or local
transfer”. The reason for this is enhancement of the profitability of the
bank’s loan resources.
In order to redress the current
dependence on oil, the federal government formulated policies to encourage
industrialization. Some of these policies are with regards to the pattern of
lending and credit by banks. The role commercial banks in any economy
especially a developing economy like Nigeria cannot be over-stressed.
They exert a great influence on the economic development of the nation through
the granting of loans and advances.
It is the aim of this project to study
the procedure and policy of granting loans, administration of credit, effect of
bad debt on profitability of banks and other relevant issues.
1.1 STATEMENT OF PROBLEM
It has been revealed from experience
that most lending officers tend to undermine the importance of credit control
and management in their lending function because of the difficulties usually
associated with it.
Lending officers dealing with customers
loan application usually exercise personal judgment in authorizing loan and
disbursement of such loan. In the hope that all will be well with the customer,
his project and the bank’s money.
However, in a dynamic economic environment
as we have in this country where things charge and with banking education and
business experience yet to become well entrenched, a bank should not be cut off
guard because of poor management of its loan portfolio.
There is also the failure of bank
management to establish sound lending policies, adequate credit administration
procedure. Also, their failure to monitor and administer the loan within the
established guidelines primarily results in poor loan portfolio.
Many banks today are facing the problem of
bad debt owing to their failure to monitor the project of their customers.
Banks as custodians of depositors’ fund
are obliged to exercise due care and prudence on their lending operations.
PURPOSE OF STUDY
The purpose of studying credit
management in banking sector are highlighted below:
fulfillment of the requirement of the award of
the importance of sound credit management policy which aims at reducing high
incidence of bad debt.
make the policy makers realize the importance of formulating sound credit
management policy. To make bank customers realize the need to inform their
banks wherever they encourager any problem in their project so that such
problem can be jointly solved and such loan will not result in bad debt.
to contribute to knowledge.
RELEVANCE OF STUDY
The study is relevant because it will
help banks in their lending operations. It will also help banks to recover
loans granted to their customers and reduce, if not eliminate completely, the
possibility of the loan becoming bad. Thus, profit will increase. Since high
incidence of bad debt is one of the causes of banks failure, the study will
have the overall effect of reducing bank failure, stabilize financial sector
and restore the confidence of depositors in financial sector.
HISTORY OF BANKING
ROLE OF ITALIAN GOLDSMITH
It all started several centuries ago. As
far back as the 13th century, a group of Italian goldsmiths who migrated from
an Italian province, Lomdardly, had settled in a part of London now called Lombard Street. By gradual process, these
Italian settlers before the end of 16th century had evolved a system of
transaction, which today forms the very foundation of a modern banking.
BUSINESS IN GOLD
The Italian goldsmith only carried out
the traditional services of their craft. As time went on, however, their
business grew and they found it necessary to acquire vaults for safe custody of
all gold and precious stones they received from their clients. It was at this
juncture that their services increased to include:
gold for the client
their gold and those received for work from the client.
gold deposits from clients for safe keeping against receipts.
part of their gold stock-first from their own and later including deposits from
FROM GOLD TO MONEY
The fact of issuing of receipts against
deposits of gold gave a lever to the development of banking thus;
1. Goldsmiths released their clients’ deposits
on the surrounding of their receipts.
to the widespread use, goldsmiths’ receipt become transferable.
receipts became the first known issue of notes.
receipts were latter split into smaller units according to needs.
of lending in gold, goldsmiths issued their notes (receipts) to borrowers
according to the value of gold they required.
transferred part of the whole of the client’s deposit against the letter of
instruction and this was the beginning of the cheque system.
The Birth of Banking Institutions
The result of the above far-reaching
development in banking activities led to small group of goldsmiths, pooling
their resources together and setting up business as merchant and private
bankers. In 1694, the Bank of England was founded to control the private and
merchant banks, as well as to administer the government’s debt.
African Banking Corporation 1892
The African Banking Corporation was
established in 1892, when Nigerian had there foreign banks namely. The bank of British
West African, Barclays Bank and the British and French Bank. Other two
indigenous banks than were: the National Banks of Nigeria and the African continental
banks with a total of 40 (forty) branches.
Nigerian Banking History Foreign Banks
Bank Nigeria Limited: In 1894, a British-owned bank opened it’s office in Nigeria and
operated under the name of Bank of British West Africa. This bank has the
credit of being the first bank to be established in Nigeria. The bank latter changed
its name to standard bank for West African Limited. In accordance with the
companies act of 1968, this pioneer expatriate bank was incorporated in Nigeria as the Standard
Bank Nigeria Limited. It has over three hundred branches scattered all over the
federation and has its head office in Lagos.
In 1978 this bank latter changed his name to First Bank of Nigeria Limited.
Barclays Banks of Nigeria Limited: Less than three decades after the
pioneer bank opened its office in the country, the Barclays Bank D.C.O. came
into the Nigerian banking scene in 1917. Barclays is an international bank
based in Britain.
Like its predecessor, Barclays Bank D.C.O. (dominion colonies and overseas)
helped in creating the necessary atmosphere for cultivating banking habits in
Since the Companies Act of
1968, the bank has incorporated in the country as Barclays Bank of Nigeria
limited. The bank was the reputation of being one of the largest banks in Nigeria with
over three hundred branches and its head office in Lagos Barclays changed its
name to Union Bank of Nigeria
limited in 1978.
History of UBA: The United Bank for Africa (UBA) has
undergone formidable changes, growth and restructuring, since its formation. It
was formally known in 1932 as ‘Bamque National Pour Le Commerce et L’
Industries, NBCI, Paris
(A French own name) and translated into British and French Banks Limited (BFBL)
in 1949. In 1961, the bank was established in West African particularly Nigeria to
delivers unparralled, quality banking services and being the lending bank in
assets and balances sheets.
In 2005, UBA merged with
Standard Trust Bank Plc lending to UBA Group. It recently acquired continental
Trust Bank Limited (CTB). The union merged as the successful corporate
combination in the history of Nigerian banking. It become the first Nigerian
Bank to be listed on the Nigerian Stock Exchange by way of an Initial Public
Offer (IPO) in 1970.
The bank was also the first
to issue a Global Depository Receipt (GDR) which has attracted significant foreign
United Bank for Africa (UBA)
has become the largest financial services institution in West African with a
balance sheet size in excess of one trillion naira and more than size million
and thirty (630) retail distribution centres across Nigeria. It is found in New York and Cayman Islands.
The bank parades quality
professional tested and trusted, executive directors, bankers, an erstwhile
CEO, Tony Elumelu among other executive directors.
PIONEER INDIGENOUS BANKS
i. National Bank of Nigeria Limited
In 1933, the National Bank of Nigeria
Limited was established by some private Nigerian citizens, and it became the
first indigenous bank in this country. The bank almost folded up after the 1952
banking ordinance because of its inability to meet the demands of the ordinance.
However, the then Western Regional Government subsequently came to the rescue
of the bank by sending in huge capital funds from the resources of the
government owned marketing board.
The bank has continued as a
single-handed enterprises of the western state government. It has its head
office in Lagos
and operate branch offices scattered all over the country. It is worthy of note
to mention that the bank has collapsed majorly, due to mismanagement.
Agbonmagbe Bank Limited
Another indigenous bank to spring up in
the country was Agbonmagbe Bank Limited. It was established in 1945 and later
changed its name to Wema Bank in 1969 after it was taken over by the Western
Nigeria Development Corporation. It has head officer in Lagos and initially maintained branches in
African Continental Bank Limited
In 1944, Dr. Nnamdi Azikiwe acquired
Tinubu properties limited which was later renamed Tinubu Bank Limited. But in
1947, the bank changes its name to its present name, African Continental Bank
Limited and opened its first office in Yaba.
In the 1950s the bank passed into the
hand of the then Eastern Region Government, which moved in funds to save the
bank from collapsing, closely following this was a public inquiry that shook
the clientele of the bank but was quickly gone-over. The bank has proudly
survived yet another crisis, namely the Nigeria civil war. The hand
branches scattered all over the country with is head office in Lagos.
High Bank Mortality
Between 1949 and 1952, over ten banks
sprang up in the country. Almost all the mushroom banks formed during that
period fizzle away before December 1953 due to:
of banking regulation
competition with expatriate banks
First Banking Ordinance
In 1952, the First Banking Law (Banking
Ordinance of 1952) was promulgated as a way of arresting the wave of mass
banking liquidation and instilling sanity in the Nigerian Banking System. The
i. New banks incorporated in the country to
have a minimum nominal capital of N50,000.00.
ii. New Banks to incorporated with minimum paid
up capital of N25,000.
banks not incorporated in Nigeria
to show evidence of paid-up capital of N200.000.
banks to obtain a license from the finance secretary before operating.
least 20% of the profit must be paid into the bank’s reserve until the valve of
reserve is equal to the paid-up capital.
evidence to be paid, until the capitalized expenditure of the bank has been
fully written off.
banks to submit to the financial secretary evidence of adequate degree of
liquidity. All existing banks were required to comply within three years.
Other legislation which have affected
banking in Nigeria since then include the 1958 Banking Ordinance, the Central
Bank of Nigeria Act of 1958, the 1962 Banking Ordinance (Amendment), the 1969
Banking Degree (Now repealed) the companies act of 1968 (now repealed), the Indigenization
Degree of 1972, the Nigeria Enterprises Promotion Act of 1977 (Now amended),
the companies Degree of 1991, the C.B.N Degree No 24 of 1991 and the Banks and
other financial institutions degree No 25 of 1991.
PROFILE OF BANK UNDER REVIEW: UBA PLC
The United Bank of Africa (UBA) Plc is
one of Nigeria’s
top these commercial banks. It was established in 1961 by a consortium of five
international banks to take over the banking business carried on in Nigeria since
1949 by the British and French Bank Limited. With assets of over N44 billion
and 199 branches spread all over Nigeria, the bank has revealed an
impressive growth rate.
UBA is active in all aspect of commercial
banking and provide international banking; trusteeship, share registration,
corporate finance computer services through specialization division and
An aggressive business promotion
strategy coupled with a willingness to innovative has earned the bank an
enviable position in the banking industry. UBA Plc is strongly committed to its
social responsibilities and identifies with the community in which it is
represented. Nigerian interest constitute 60% of the shareholding of the bank.
Four of the founding international banks
namely, Banque Nationale de Paris, Bankers International Corporation, New York,
Banca Natioanl del Lavoro and Monte dei Paschi di Sierra, who altogether own 40
percent of the shareholding, are represented on the board of directors and
continue to make their expertise and resources throughout the world available
to assist the bank and its customers.
UBA Plc has branches in New York and Grand Cayman Island. It also maintains correspondent relationship
with many banks in Africa and in major
countries in the world.
SCOPE OF STUDY/LIMITATION
This study is mainly on United Bank for
African (UBA) Plc. The bank, being a large bank with over 200 branches
nationwide, because of constraint of time and cost, all the branches cannot be
covered. This study will be confined to the head office and few branches in Lagos.
ORGANISATION OF STUDIES
1.0 BACKGROUND OF INTRODUCTION
The major function of universal banks
toward extension of credit facilities to their customers. Universal banks
started in Nigeria
to be precise. 117 years ago (1892) with the establishment of African Bank
Corporation (ABC) which acted as the agent of bank of England. In
1894, Bank of British West African was established. The bank has credit of
being the first bank to be established in Nigeria. Its name was later changed
to Standard Bank Nigeria Limited. They proceeded before changing it again to
the first bank in 1978. The banking section has witnessed the emergence and
demise of many banks within the period of 1949 to 1951. while the bank under
review (UBA Plc) was established 1961 by a consortium of 5 international banks
to take over the branding business carried out in Nigeria since 1949 by the British
and French Bank Limited. This Universal Banking has branches both in Nigerian
It is the project that deals with
researcher design and methodology. It mentions about all the relevance data,
collected through the primary and secondary sources. The method used in writing
this project is the data collection, questionnaire and interview.
ANALYSIS AND INTERPRETATION
This chapter four explains full details
of the project, it deals with data analysis and interpretations. The different
questions in the questionnaire were analysed one after the other. In addition,
two hypothesis were tested the null hypothesis we accepted while the
alternative hypothesis were rejected.
SUMMARY, CONCLUSION AND RECOMMENDATION
Tis lastly chapter discusses about the
result of the interview conducted by the research in the course of the project
The researcher intends to carryout the
study in Lagos State. He intends to use United Bank for
African Plc as his case study. The credit officers and branch managers of
selected branches are the subject or respondents. The instrument to be used is
generation data in the respect of the project are questionnaire and interview.
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