ATTENTION:
BEFORE YOU READ THE PROJECT WORK, PLEASE READ THE
INFORMATION BELOW. THANK YOU!
TO GET THE FULL PROJECT FOR THE TOPIC BELOW PLEASE CALL:
08068231953, 08168759420
TO GET MORE PROJECT TOPICS IN YOUR DEPARTMENT, PLEASE VISIT:
THE IMPACT OF BANK CONSOLIDATION ON OPERATIONAL EFFICIENCY IN FIRST BANK
OF NIGERIA PLC
CHAPTER ONE
INTRODUCTION
1.1
Background of the Study
The consolidation of banks has been
the major policy instrument being adopted in correcting deficiencies in the
financial sector. The economic rationale for domestic consolidation is
indisputable. An early view of consolidation in banking was that it makes banking
more cost efficient because larger banks can eliminate excess capacity in areas
like data processing, personnel, marketing, or overlapping branch networks,
cost efficiency also could increase if more efficient banks acquired less
efficient ones. Though studies on efficiency in banking raised doubts about the
extent of overcapacity, they did point to considerable potential for
improvement in cost efficiency through mergers. Consolidation is viewed as the
reduction in the number of banks and other deposit taking institutions with a
simultaneous increase in size and concentration of the consolidation entries in
the sector (Bis 2001).
The driving forces in bank
consolidation include better risk control through the creation of critical mass
and economics of scale advancement of marketing and product initiatives,
improvements in overall credit risk and technology exploitation. These drivers
have led to improved operational efficiencies and larger and better capitalized
institutions. The results of this policy are neither here nor there contrary to
the expectation. The most difficult aspect of consolidation is the ones induced
by government through mergers and acquisition. Farlong (1994) claimed that
consolidation in banking is distinct 1990’s market induced consolidation
normally holdout promises of scale economics, gains in operational efficiency,
profitability improvement and resources maximization, the outcomes have however,
not totally confirmed these supposed benefits and they have varied across
jurisdictions, especially when compared with the particular pre-consolidation expectations.
Whatever the potential, the research go
far on the effects of bank mergers ahs not found strong evidence, that on
balance, mergers banks improve cost
efficiency relative to other banks. This does not mean that many mergers,
including those of some large banks, have failed to lead to significant gains
in cost efficiency. It just means that the outcomes for those banks tend to be
offset by problems encountered in other mergers, and that many banks have
improved cost efficiency without merging.
A new view is that bank mergers are
not just about adjusting inputs to affect costs; rather, they also involve adjusting
output (products) mixes to enhance revenues. Two research efforts taking this
approach are Akakhavein, et al. (1997), covering mergers in the 1980’s, and Berger
(1998), covering mergers in the 1990s. These studies find that bank mergers do
tend to be associated with improvements in overall performance, in part,
because banks achieve higher valued output mixes. While these studies do not
track all of the channels through which bank mergers affects the value of
output, they suggest that one channel has been banks’ shift towards higher
yielding loans and away from securities.
This channel is particularly
interesting given the other, results in these studies. They find that merged
banks also tend to experience a lowering of their cost of borrowed funds
without needing to capital ratios. The lower cost of funds is consistent with a
decline in the overall risk of the combined bank compared to that of the merger
partners taken separately. This apparently occurs even though a shift to loans
by itself might be expected to increase risk. One interpretation of these
results, then, is that a merger can result in a reduction in some dimensions of
risk, which then affords the post-merger bank more latitude to shift to a
higher return, though perhaps higher risk but output mix. The sources of diversification
could be differences in the range of services, the portfolio mixes, or regions
several by the merging banks.
It is against this background that
the subject matter of this research becomes worthy of investigation.
1.2
Statement of the Problem
The current credit crisis and the
transatlantic mortgage financial have questioned the effectiveness of bank
consolidation programme as a remedy for financial stability and monetary policy
in correcting the defects in the financial sector for sustainable development.
Many banks consolidation had taken place in several countries in the last two
decades without any solution in sight to bank failures and crisis, Olabisi
(2006).
As such the concerned of this
research is; does bank consolidation ahs any impact on the operational
efficiency of first Plc Kaduna? It is against this that the subject matter is
considered a problem.
1.3
Objectives of the Study
i. To identify the impact of bank
consolidation on operational efficiency of first bank.
ii.
To
asses the performance of first bank in post-consolidation period.
iii.
To
find out the problems militating against first bank in post-consolidation
period.
iv.
To
recommend workable solution to the identified problem of first bank in
post-consolidation period.
1.4
Significance of the Study
The study will be beneficial to
commercial banks in Nigeria,
especially as they utilize the findings of this research to solve
post-consolidation problems militating against their banks.
The study will enhance existing
knowledge of bank consolidation problems militating against their banks.
The study will enhance existing
knowledge of bank consolidation and will be a springboard to undertake similar
research.
1.5
Research Questions
i.
What
is the impact of bank consolidation on operational efficiency of first bank?
ii.
How
is first bank performing in the post-consolidation period.
iii.
What
are the problems militating against first bank in post-consolidation period.
iv.
What
are the solutions to these problems?
1.6
Scope of the Study
The study will cover an investigation
into the impact of first as well as assessment of its performance in the post-consolidation
period.
The study will equally cover problems
militating against first bank in first-consolidation period. The collection of
primary data will be restricted to first bank Kaduna.
1.7
Definition of Terms
Bank:-Can be
define as a place of business that receives, lends, issues, exchanges and takes
care of money: extent credit and provide ways of sending money and credit
quickly from place to place.
Consolidation:-It
is the reduction in the number of banks and other deposit taking institution
with a simultaneous increase in the size and concentration of the consolidation
entities in the sector (Bis, 2001:2).
Economy:-Can be defined as the structure of
economic life of a country, area or system. From “Convergence”. He says that
consolidation refers to merger and acquisitions of banks by banks while
convergence refers to the mixing of banking and other types of financial
services like securities and insurance, through acquisitions or other means. He
concluded that the impact of consolidation on bank structure has seen obvious,
while its impact on bank performance has been harder to discern.
The government policy – promoted bank
consolidation rather than market mechanism has been the process adopted by most
developing or emerging economies and the time lag of the bank consolidation
varies from nation to nation. Banking sectors reforms are part of monetary policy
instruments for effective monetary systems and major shifts in monetary policy
transmission mechanisms economies in the last decade in both developed and
developing nations. The banking sector in emerging economies has witnessed
major changes to compete, attract international investment and increase capital
market growth.
Comments
Post a Comment