IMPACT OF CREDIT RISK MANAGEMENT ON THE PROFITABILITY AND LIQUIDITY OF DEPOSIT MONEY BANK

(A CASE STUDY OF UNION BANKK OF NIGERIA PLC)
 	
By:
OGUNDIPE TAIYEE JANET
HND/23/BFN/FT/0090

BEING A RESEARCH PROJECT SUBMITTED TO THE DEPARTMENT OF BANKING AND FINANCE, INSTITUTE OF FINANCE AND MANAGEMENT STUDIES, KWARA STATE POLYTECHNIC, ILORIN.

IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF HIGHER NATIONAL DIPLOMA (HND) IN BANKING AND FINANCE

MAY, 2025
CERTIFICATION
This project has been read and approved as meeting the requirements for the award of Higher National Diploma (HND) Banking and Finance Department, Institute of Finance and Management Studies, Kwara State Polytechnic Ilorin, Kwara State.

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MR. JIMOH ISMAIL					DATE
(Project Supervisor) 		

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MRS. OTAYOKHE E.Y					DATE
 (Project Coordinator) 

	

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MR. AJIBOYE W.T.					DATE
Head of Department (H.O.D)	

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DATE
(External Examiner)

DEDICATION
I dedicate my project to Almighty God and to my lovely parents

ACKNOWLEDGEMENT 
First and foremost, I give all glory, honor, and adoration to the Almighty God, the giver of wisdom, strength, and life, for His unfailing love, guidance, and grace throughout this journey.
My deepest appreciation goes to my beloved parents, MR. and MRS. AJEWOLE, for their endless support, prayers, encouragement, and sacrifices. Your love has been my greatest source of strength.
I extend my sincere gratitude to my supervisor MR. JIMOH ISMAIL, my Head of Department (HOD) MR. AJIBOYE W.T., and all my esteemed lecturers for their invaluable guidance, mentorship, and dedication to academic excellence.
Special thanks to MR. AJEWOLE HENRY, MR. and MRS. AFOLAYAN OLALEKAN, and ABOLARIN EMMANUEL for their support, encouragement, and kind gestures. Your contributions, in different ways, have made a significant impact on this journey.
To my dear friends and everyone who, in one way or the other, assisted me thank you for your kindness, motivation, and belief in me. I truly appreciate every word of encouragement, every act of help, and every show of support.
May God bless you all abundantly.

TABLE OF CONTENTS
Title Page									i
Certification									ii
Dedication									iii
Acknowledgment								iv
Table of Content								v

CHAPTER ONE
1.0	Introduction								1
1.1	Statement of the Problem 						2
1.2	Research Questions							3
1.3	Objective of the Study 						3
1.4	Research Hypothesis 							4
1.5	Significance of the Study						4
1.6	Scope and Limitation of the Study					5
1.7	Definition of Terms							6
1.8	Plan of the Study							6
CHAPTER TWO
2.0	Literature Review							8
2.1	Conceptual Review							8
2.2	Theoretical Framework						17
2.3	Empirical Review							19
2.4	Gap of Literature							21
CHAPTER THREE
3.0	Research Methodology						22
3.1	Introduction to Methodology						22
3.2	Research Design							22
3.3	Population of the Study						22
3.4	Sample size and Sample Techniques 					23
3.5	Method of Data Collection						23
3.6	Method of Data Analysis 						24
3.7	Limitations to Methodology						24
CHAPTER FOUR
4.0	Data Presentation, Analysis and Interpretation 			25
4.1	Data Presentation							25
4.2	Data Analysis 								26
4.3	Data Interpretation 							33
CHAPTER FIVE
5.0	Summary, Conclusion and Recommendations			34 
5.1	Summary of Findings							34
5.2	Conclusion								34
5.3	Recommendations							35
	References								37

CHAPTER ONE
INTRODUCTION
1.1	Background to the Study
Credit risk management is a fundamental aspect of banking operations and plays a pivotal role in ensuring the stability and profitability of financial institutions. Deposit money banks, such as Union Bank of Nigeria, face substantial credit risk due to the possibility of default by borrowers. This risk arises from the bank's primary function of granting loans, which is inherently uncertain (Basel Committee, 2001). Effective credit risk management ensures that banks maintain a balance between risk and return, contributing to their financial stability and the broader economy.
The profitability of banks largely depends on their ability to manage risks associated with lending activities. According to Saunders and Cornett (2018), poor credit risk management practices often lead to significant loan losses, which erode profitability and shareholder value. Deposit money banks that fail to adopt robust credit risk management strategies are more likely to experience financial distress, as observed during the global financial crisis of 2007-2008. This underscores the critical need for effective risk assessment tools and frameworks in the banking sector.
Liquidity, another vital aspect of banking operations, is closely tied to credit risk management. Banks must maintain sufficient liquidity to meet short-term obligations, such as deposit withdrawals, while ensuring profitability from lending activities. Mishkin and Eakins (2019) argue that poor credit risk management often leads to liquidity challenges, as a rise in non-performing loans (NPLs) constrains the bank's ability to generate cash flows. This dynamic highlights the interconnectedness of credit risk, liquidity, and profitability in the banking industry.
Union Bank of Nigeria, like other financial institutions, has faced challenges related to credit risk and its impact on liquidity and profitability. As one of Nigeria's oldest banks, its performance in managing credit risk significantly influences its operational stability and market reputation. Historical trends indicate that periods of high credit default rates have often coincided with declining profitability and strained liquidity in the banking sector (Central Bank of Nigeria [CBN], 2020).
To address these challenges, regulatory authorities and financial institutions have implemented various credit risk management strategies. The introduction of the Basel Accords, particularly Basel III, has provided banks with guidelines to strengthen their capital base and enhance risk management practices (Bank for International Settlements, 2011). In Nigeria, the Central Bank has also introduced regulatory frameworks to ensure that banks adopt sound credit risk management practices, which are critical for maintaining financial system stability.
Research on credit risk management has highlighted its significance in enhancing the financial performance of banks. According to Nwankwo (2021), banks that invest in advanced credit assessment tools and staff training tend to report lower levels of NPLs and higher profitability. However, despite these efforts, challenges persist, particularly in developing economies where economic volatility and regulatory inconsistencies often undermine the effectiveness of credit risk management systems.
This study focuses on Union Bank of Nigeria as a case study to examine the impact of credit risk management on the profitability and liquidity of deposit money banks. By analyzing the bank's credit risk management practices, this research seeks to provide insights into the effectiveness of these strategies and their implications for financial performance. The findings will contribute to existing literature on the subject and offer practical recommendations for improving credit risk management in Nigeria's banking sector.
1.2	Statement of the Problem
Credit risk remains a critical challenge for deposit money banks in Nigeria, significantly impacting their profitability and liquidity. Despite regulatory efforts and the adoption of international risk management frameworks, many banks continue to grapple with high levels of non-performing loans (NPLs), which erode profitability and strain liquidity. Union Bank of Nigeria, like other financial institutions, faces difficulties in balancing risk-taking with sustainable returns. The problem is compounded by economic volatility, poor credit appraisal processes, and inadequate risk monitoring mechanisms, which expose banks to heightened default risks. These challenges threaten the financial stability of the banking sector and hinder its ability to effectively contribute to economic development.
Moreover, the interdependence between credit risk, profitability, and liquidity creates a complex management dilemma for banks. Poor credit risk management often leads to reduced cash inflows, limiting a bank’s ability to meet short-term obligations and affecting customer confidence. Despite Union Bank’s long-standing presence and experience in the Nigerian banking industry, the persistent impact of credit defaults on its financial performance highlights a gap in implementing effective risk management strategies. This study, therefore, seeks to investigate how credit risk management practices influence the profitability and liquidity of Union Bank of Nigeria, aiming to provide actionable recommendations for improving its financial performance.
1.3	Research Questions
i.	What is the relationship between credit risk management practices and the profitability of Union Bank of Nigeria?
ii.	How does credit risk management affect the liquidity position of Union Bank of Nigeria?
iii.	What are the challenges faced by Union Bank in implementing effective credit risk management strategies?
1.4	Objectives of the Study
i.	To examine the relationship between credit risk management practices and the profitability of Union Bank of Nigeria.
ii.	To assess the impact of credit risk management on the liquidity position of Union Bank of Nigeria.
iii.	To identify the challenges faced by Union Bank in implementing effective credit risk management strategies.
1.5	Research Hypotheses
Hypothesis 1
H₀₁: There is no significant relationship between credit risk management practices and the profitability of Union Bank of Nigeria.
H₁₁: There is a significant relationship between credit risk management practices and the profitability of Union Bank of Nigeria.
Hypothesis 2
H₀₂: Credit risk management does not have a significant impact on the liquidity position of Union Bank of Nigeria.
H₁₂: Credit risk management has a significant impact on the liquidity position of Union Bank of Nigeria.
Hypothesis 3
H₀₃: Union Bank does not face significant challenges in implementing effective credit risk management strategies.
H₁₃: Union Bank faces significant challenges in implementing effective credit risk management strategies.
1.6	Significance of the Study
This study is significant as it provides valuable insights into the role of credit risk management in enhancing the financial performance of deposit money banks, with a specific focus on Union Bank of Nigeria. By examining the relationship between credit risk management practices and key financial indicators such as profitability and liquidity, the study offers practical recommendations for improving risk management strategies. These insights are critical for bank executives and policymakers in designing effective frameworks to mitigate risks and enhance the financial stability of banks, thereby fostering sustainable economic growth.
Furthermore, the study contributes to the existing body of knowledge on credit risk management in Nigeria's banking sector. It provides empirical evidence on the challenges faced by banks in implementing risk management practices, offering a basis for future research and policy interventions. For regulatory authorities such as the Central Bank of Nigeria, the findings can serve as a guide for formulating policies that strengthen credit risk management systems in the banking industry. Additionally, academic researchers and students will benefit from the study as a reference material for understanding the dynamics of credit risk and its impact on bank performance.
1.7	Scope and Limitation of the Study
This study focuses on the impact of credit risk management on the profitability and liquidity of deposit money banks, using Union Bank of Nigeria as a case study. It examines the bank's credit risk management practices, their relationship with financial performance indicators, and the challenges encountered in implementing effective risk management strategies. 
The study is limited by its concentration on a single financial institution, Union Bank of Nigeria, which may restrict the generalizability of findings to other banks or sectors. Additionally, reliance on secondary data such as financial reports may introduce biases or inaccuracies beyond the researcher’s control. Time and resource constraints may also limit the depth of data collection and analysis. 
1.8	Definition of Terms
Credit Risk Management: The process by which a bank identifies, assesses, and mitigates the risk of financial loss due to a borrower’s inability to repay loans or meet financial obligations.
Profitability: The ability of a bank to generate income relative to its expenses and assets, typically measured using financial ratios such as return on assets (ROA) and return on equity (ROE).
Liquidity: A bank’s ability to meet its short-term financial obligations, such as customer withdrawals and operational expenses, without experiencing financial distress.
Non-Performing Loans (NPLs): Loans or advances for which the borrower has stopped making scheduled payments for a specified period, typically 90 days or more.
Deposit Money Banks: Financial institutions authorized to accept deposits from the public and provide credit facilities, including commercial and retail banks.
Basel Accords: International banking regulatory frameworks that provide guidelines on risk management, capital adequacy, and liquidity standards to enhance financial system stability.
Central Bank of Nigeria (CBN): The apex regulatory authority in Nigeria's financial system, responsible for supervising and regulating banks to ensure economic stability.
1.9	Plan of the Study
This study is organized into five chapters to ensure a systematic and comprehensive analysis:
Chapter One introduces the study, covering the background, problem statement, objectives, research questions, hypotheses, significance, scope, limitations, and definition of terms. 
Chapter Two presents a detailed literature review, including conceptual, theoretical, and empirical discussions on credit risk management, profitability, and liquidity in the banking sector.
Chapter Three outlines the research methodology, including the research design, population, sample size, data collection methods, and analysis techniques.
Chapter Four focuses on data presentation, analysis, and interpretation, highlighting the relationship between credit risk management and the financial performance of Union Bank of Nigeria.
Chapter Five provides the summary of findings, conclusions, and recommendations, as well as suggestions for further research.

CHAPTER TWO
LITERATURE REVIEW
2.1	Conceptual Review
2.1.1	Credit Risk Management
Credit Risk Management (CRM) this involves the administration of credit facility to ensure orderly and full payment, monitoring of credit facilities as well as identifying strategies when credits actually deteriorate. Banks need not to involve in business in a way that unnecessarily imposes risks upon them, nor should they absorb risks that can be effectively transferred to other participants, but rather, they should accept risks that are uniquely part of their array of services (UNDP, 2008). Banks should conduct adequate due diligence to fully understand the credit risks that exist both for individual loans and for the entire portfolio. Effective portfolio management begins with the oversight of the risk in the individual loans. Provident risk selection is crucial to maintaining useful loan quality. The purpose of portfolio management is to assess the likelihood of timely credit repayment. The historical emphasis on controlling the quality of individual loan approvals and managing the performance of loans continues to be essential (Ledgerwood, 2009).
Credit risk management is a fundamental aspect of banking that involves identifying, assessing, monitoring, and mitigating the risk that borrowers may default on their financial obligations. It is aimed at minimizing losses while maximizing returns, ensuring the stability and sustainability of financial institutions. According to Saunders and Cornett (2018), credit risk management entails a series of practices and strategies designed to evaluate the creditworthiness of borrowers and the quality of loan portfolios. Effective credit risk management involves assessing both internal factors (such as the bank’s lending policies, credit scoring models, and loan recovery procedures) and external factors (such as macroeconomic conditions and industry trends).
The concept also integrates the use of advanced tools and techniques, such as credit risk models, stress testing, and early warning systems, to predict potential defaults and safeguard the bank’s financial health (Mishkin & Eakins, 2019). Moreover, credit risk management is crucial in ensuring that banks maintain adequate capital reserves to absorb potential losses without jeopardizing their liquidity and overall stability. Basel III guidelines emphasize the importance of strong credit risk management practices, requiring banks to enhance their risk assessment frameworks and improve capital adequacy (Bank for International Settlements, 2011).
2.1.2	Credit Management
Myers and Brealey (2003) defined credit management as a method and strategy adopted by a manufacturing firm to ensure that credits are kept at optimal level and also ensures its effective management. It specifically involves credit classification, credit analysis, credit rating and credit reporting. Credit management is indispensable for any firm relations with credit transactions to ensure its growth since it is impossible to have a zero default or credit risk in any situations. There is a direct connection between account receivables and their financial cost such that, the higher the amount of accounts receivables and their age, the higher the financial costs incurred in maintaining them. If a firm’s default rate of repayment is high and urgent cash needs may arise that can lead to borrowing and the opportunity cost in this regard is the interest expenses incurred. Nzotta (2004) averred that credit management has great influence on the success or failure of firms financially and otherwise. This is because the failure of firms is highly influenced by the quality of credit decisions and thus the risk asset quality. Effective credit management keenly require the ability to intelligently manage customer credit lines. In other words, to minimize exposure to bad debts and bankruptcy, firms must deeply know a customer’s financial strength, full business details, credit score history and fluctuating payment patterns.
According to Hettihewa (1997), Credit Management is extremely important as granting credit is considered to be the equivalent of investing in a customer. However, payment of the debt should not be postponed for too long as delayed payments and bad debts are a cost to the company.
According to Edwards (1993), unless a seller has built into his selling price additional costs for late payment, or is successful in recovering those costs by way of interest charged, then any overdue account will affect his profit. In some competitive markets, companies can be tempted by the prospects of increased business if additional credit is given, but unless it can be certain that additional profits from increased sales will outweigh the increased costs of credit, or said costs can be recovered through higher prices, then the practice is fraught with danger. An efficient and effective credit management will reduce the capital that is locked with the debtors, as well as reduces the possibility of bad debts.
John Greijmans (2015), discussed that there are important steps in the credit management process which includes; reviewing credit worthiness and deciding whether or not to extent credit, monitoring amounts that are not yet due, but on which you nevertheless run the risk of late or non-payment and collecting the cash of amounts that are past due, but have not yet been settled. Several factors are also used as part of the credit management process to evaluate and qualify customer for the receipt of some form of commercial credit. This may include; gathering data on the potential customer’s, current financial condition including the current credit track record that discloses the character of a customer in meeting obligations as well as collateral value. The current ratio between income and outstanding financial obligations will also be taken into consideration.
2.1.3	Concept of Credit Risk 
Attempts have been made by various authors to define the term credit risk. One of them is Kanchu and Kumar (2013), who defined credit risk as the potential that a bank borrower or counterparty fails to meet the obligations on agreed terms. Kolapo, Ayeni and Oke (2012) defined credit risk as the exposure faced by banks when a borrower (customer) defaults in honoring debt obligations on due date or at maturity, this risk is capable of putting the bank in distress if not adequately managed. Kolapo et al (2012) and Chen and Pan (2012), viewing the concept of credit risk from another perspective, defined credit risk as the degree of value fluctuations in debt instruments and derivatives due to changes in the underlying credit quality of borrowers and counterparties. Coyle (2000) defined credit risk as losses from the refusal or inability of credit customers to pay what is owed in full and on time. Gizaw, Kebede and Selvaraj (2015) described credit risk as the risk that arises from default or delay in repayment of obligations and affects most assets held by credit institutions including loans, marketable securities and equity interests. The Basle Committee on Banking Supervision (2001) described credit risk as the possibility of losing the outstanding loan partially or totally, due to credit events (default risk). Kolapo et al (2012) and Psillaki, Tsolas and Margaritis (2010) stated that Basel Accord’s emphasis on sound credit risk management practices and strict compliance with credit policies is premised on the increasing growth of non-performing loans across various jurisdictions, a problem which the accord is partly out to address, in order to ultimately improve bank performance. Kithinji (2010) defined credit risk of a bank as the possibility of loss arising from non-payment of interest and principal or both or non-realization of securities on the loans. In another breath, Conford (2000) also defined credit risk as the possibility that the actual returns on an investment or loan extended will deviate from that which was expected. Mbucho and Senaji (2015) defined credit risk as change in the value of the asset portfolio of a bank, due to the failure of an obligor to meet his payment commitments. Kithinji (2010) identified the main causes of credit risk which include, absence of adequate institutional capacity, improper credit policies, volatility of interest rates, low capital, insider lending, weak judicial systems, poor management, low capital and liquidity levels, massive licensing of banks, reckless lending, poor credit assessment, poor lending practices, government interference and inadequate supervisory and regulatory responsibilities. Another scholar who examined the concept of credit risk management is Onaolapo (2012), who compared the proportion of owner’s equity to total asset of banks and observed that a deposit money bank like most financial institutions ideally hold little owner’s capital relative to the aggregate value of its assets. This implies that, even if only a small percentage of total loans turn bad, it could taint the entire credit portfolio and expose the bank to threat of failure. Onaolapo (2012) differentiated between credit risk and credit risk management. The study stressed that, credit risk refers to the probability that the credit portfolio of a deposit money bank will decline in value and perhaps become worthless, while credit risk management refers to various processes designed to control and protect banks against losses associated with these risk exposures. Kithinji (2010) concluded that the credit risk framework and governance structure must be properly set up to ensure that they cover credit risk process as well as models for risk quantification and ranking. Onaolapo (2012) added that the need to mitigate a number of risk events such as self-interest of managers and impact of capital market imperfection constitute reasons advanced for credit risk management, others include credit appraisal goal and high cost of financial distress. Credit risk management also involves deploying strategies to minimize loss events arising from credit risk exposure and maintaining an optimum balance between credit risk and underlying returns. Corroborating this assertion, Kolapo, Ayeni and Oke (2012) pointed out that by maintaining credit risk exposure and deploying credit risk management tools, banks are in a position to leverage on credit risk management activities to maximize their risk adjusted rate of return. This implies that at every portfolio aggregation level, an effective credit risk management system will ensure that credit risk exposures are appropriately priced and diversified to maintain an optimum portfolio equilibrium and acceptable risk-return trade-off. Coyle (2000), Kithinji (2010) and Ugoani (2016) also defined credit risk management as an end to end process that involves identification, measurement, monitoring and control of risk arising from the possibility that loan repayment may be defaulted. It involves a comprehensive process driven by appropriate technology, structure, policies and skilled man power to ensure that in the first place, lending decisions are a product of quality analysis and credit control.
2.1.4	Credit Risk Management Strategies
The credit risk management strategies are measures employed by banks to avoid or minimize the adverse effect of credit risk. A sound credit risk management framework is crucial for banks so as to enhance profitability guarantee survival. According to Lindgren (1987), the key principles in credit risk management process are sequenced as follows; establishment of a clear structure, allocation of responsibility, processes have to be prioritized and disciplined, responsibilities should be clearly communicated and accountability assigned. The strategies for hedging credit risk include but not limited to these; 
i.	Credit Derivatives: This provides banks with an approach which does not require them to adjust their loan portfolio. Credit derivatives provide banks with a new source of fee income and offer banks the opportunity to reduce their regulatory capital. The commonest type of credit derivative is credit default swap whereby a seller agrees to shift the credit risk of a loan to the protection buyer.
ii.	Credit Securitization: It is the transfer of credit risk to a factor or insurance firm and this relieves the bank from monitoring the borrower and fear of the hazardous effect of classified assets. This approach insures the lending activity of banks. The growing popularity of credit risk securitization can be put down to the fact that banks typically use the instrument of securitization to diversify concentrated credit risk exposures and to explore an alternative source of funding by realizing regulatory arbitrage and liquidity improvements when selling securitization transactions. 
iii.	Compliance to Basel Accord: The Basel Accord is an international principles and regulations guiding the operations of banks to ensure soundness and stability. The Accord was introduced in 1988 in Switzerland. Compliance with the Accord means being able to identify, generate, track and report on risk-related data in an integrated manner, with full audit ability and transparency and creates the opportunity to improve the risk management processes of banks. 
iv.	Adoption of a sound internal lending policy: The lending policy guides banks in disbursing loans to customers. Strict adherence to the lending policy is by far the cheapest and easiest method of credit risk management. The lending policy should be in line with the overall bank strategy and the factors considered in designing a lending policy should include; the existing credit policy, industry norms, general economic conditions of the country and the prevailing economic climate (Kithinji, 2010). 
v.	Credit Bureau: This is an institution which compiles information and sells this information to banks as regards the lending profile of a borrower. The bureau awards credit score called statistical odd to the borrower which makes it easy for banks to make instantaneous lending decision. Example of a credit bureau is the Credit Risk Management System (CRMS) of the Central Bank of Nigeria (CBN)
2.1.5	Overview of Profitability and Liquidity in Banking
Profitability and liquidity are two fundamental indicators of a bank's financial health and operational efficiency. Profitability refers to the ability of a bank to generate income in excess of its expenses, which is crucial for sustaining operations, rewarding shareholders, and reinvesting in business growth (Saunders & Cornett, 2018). Key measures of profitability in banking include return on assets (ROA), return on equity (ROE), and net interest margin (NIM). These metrics assess how effectively a bank utilizes its resources to generate earnings and provide valuable insights into its financial performance.
Liquidity, on the other hand, reflects a bank's capacity to meet short-term obligations, such as customer withdrawals and operational expenses, without incurring financial distress. It ensures that banks maintain sufficient cash or liquid assets to address immediate demands while continuing to operate efficiently (Mishkin & Eakins, 2019). Liquidity is commonly measured using ratios such as the current ratio, liquidity coverage ratio (LCR), and loan-to-deposit ratio (LDR). These indicators help in evaluating whether a bank can balance its liquid resources and liabilities effectively.
The interplay between profitability and liquidity is a critical consideration in banking operations. While profitability focuses on maximizing returns, liquidity emphasizes maintaining adequate cash flows to meet obligations. This balance is often challenging, as prioritizing liquidity may require holding low-yield assets, which can reduce profitability, whereas focusing solely on profitability can lead to excessive risk-taking and liquidity shortages (Athanasoglou et al., 2008). Effective management ensures that banks strike a balance between these two objectives, optimizing performance while minimizing risks.
Profitability and liquidity are also influenced by external factors such as regulatory requirements, economic conditions, and market competition. For instance, the Basel III framework mandates banks to maintain higher capital and liquidity standards, which can impact their profitability. While these regulations enhance stability, they may limit a bank's ability to invest in high-yield assets, thereby affecting earnings (Bank for International Settlements, 2011). Conversely, economic growth and favorable market conditions can boost profitability and liquidity by increasing the demand for banking services and improving repayment capacity among borrowers.
In Nigeria, deposit money banks face unique challenges in managing profitability and liquidity. Economic volatility, currency fluctuations, and high levels of non-performing loans (NPLs) often strain their financial performance (Central Bank of Nigeria [CBN], 2020). Despite these challenges, Nigerian banks have employed innovative strategies, such as diversification of revenue streams and adoption of digital banking technologies, to enhance profitability and improve liquidity management.
Union Bank of Nigeria, as a case study, exemplifies the need to balance profitability and liquidity effectively. Historical data suggests that periods of high profitability often coincide with effective credit risk management, which minimizes NPLs and optimizes loan recovery rates (Nwankwo, 2021). Conversely, liquidity crises have been observed during times of economic downturns, underscoring the importance of maintaining robust liquidity buffers to mitigate risks.
2.1.6 	The Concept of Deposit Money Banks Performance 
The financial performance of banks is expressed in terms of profitability and the profitability has no meaning except in the sense of an increase of net asset. Profitability is a company’s ability to earn a reasonable profit on the owner’s investment. Li and Zou (2014) defined profitability as a gauge of capability of the bank to bear risk and/or raise the capital of bank and it implies effectiveness of the bank and gauges the excellence of management. Deposit Money Banks’s performance is ability to generate new resources, from day to day operation over a given period of time and being gauged by net income and cash from operation (Aktan&Bulut, 2008). There are various measures of bank performance and the choice of the specific performance measure depends on the objective of the study. In the literature, the performance measures are: Profit after Tax (PAT), Return on Assets (ROA), Return on Equity (ROE) and cost to income ratio (CIR) and net interest margin (NIM) (Yuga, 2016).Thus, choice of the best measure of performance is tedious task (Ajayi, 2017). Therefore, studying the concept of bank performance sometimes generate different results depending on the nature of the stakeholders which analyze the term. Such multitude of opinions opens new directions in banking performance research, but this study points out single classical performance indicator Profit after Tax (PAT) which expresses the risk taking behavior of bank management in obtaining the satisfied level of profit.

2.2	Theoretical Framework
2.2.1	Credit Risk Theory
Cantor and Frank (1996) posited that credit risk theory is the first readily available portfolio model for determining credit risk. The credit risk approach enables a firm to consolidate credit risk across its entire organization and provides a statement of value-at-risk due to credit caused by upgrading, downgrading and defaulting. Credit risk model is useful to all firms that are exposed to credit risk in the course of their business. Powell (2004) explained that credit risk statistical concepts such as probability, means, standard deviation and correlation were developed with three objectives which include to develop a value-at-risk framework that is applicable to all the institutions worldwide that are involved in credit risks during the course of their businesses, develop a portfolio view showing the credit event correlation which can discern the costs of concentrations, and the gains of diversification in a mark to market framework and to apply it in making investment decisions, and risk mitigating actions that are determining the risk based credit limits across the portfolio and rational risk based capital allocations. The firm should have an integrated credit risk management system for assessing portfolio risk due to changes in debt value caused by changes in obligating credit quality (Rajan, 1995).
Prakash and Poudel (2012) believed that there are different programs which are to impair the portfolio risk by reevaluating obligations with the largest absolute size. They argued that a single default among these would have the greatest impact, reevaluate obligations with the highest percentage level of risk. They held that these would most likely contribute to portfolio losses, reevaluate obligations as well as contribute to the largest absolute amount of risk. In their opinion these are the single largest contributors to portfolio risk.
2.2.2	Theory of Financial Crises 
This theory, according to Kithinji (2010) contends that, crisis in the financial sector affects the ability of commercial banks to extend credit as well as the ability of the borrowers to service their loans. Such crisis could manifest by way of liquidity squeeze, weak demand, declining margins, currency devaluation, inconsistent government policy, unfavorable monetary policies and regulatory measures, hostile business environment, inflationary economy and high cost of business. When such crises rear their heads, ability of banks to create credit may be impaired and when they do create, default rate becomes high across various business sectors and customer types. The theory, therefore, advises additional care and caution in lending activities during periods of crisis and skillful re-strategizing to aid portfolio management and minimize loan loss accordingly.
2.3	Empirical Revıew
Hosna, Manzura and JuanJuan (2009) studied credit risk management and the profitability of deposit money banks in Sweden using multiple regression analysis and found out that non-performing loans hav significant and negative relationship with return on investment, while it is also positive and insignificantly related to return on equity. Also, Kithinji (2010) investigated the effect of credit risk management on the profitability of deposit money banks in Kenya. Secondary data were used, data were collected on the amount of credit, level of non-performing loans and profits, the study covered 2004 to 2008 and was analysed using regression technique. The results showed that, the mass of the profits of deposit money banks are not influenced by the amount of credit and non-performing loans.
Similarly, Muthee (2010) conducted a research on the connection between credit risk management and profitability of deposit money banks in Nigeria. The regression analytical technique was used to established the relationship between NPL and RO. The findings of the study showed that credit risk management has an effect on profitability of all the selected deposit money banks understudy.
Abiola and Olausi (2014) examined the Impact of Credit Risk Management on the Deposit Money Banks’ Performance in Nigeria. Panel regression analytical model was employed in the study. Return on Equity (ROE) and Return on Assets (ROA) were used as the performance indicators while Non-Performing Loans (NPL) and Capital Adequacy Ratio (CAR) as credit risk management indicators. Findings revealed that, credit risk management has a significant impact on the profitability of deposit money banks in Nigeria.
Ogbuagu, Udoh and Udoh (2016) investigated Loan Risk (LR), Loan Risk Management (LRM) and Deposit Money Bank Profitability: A Panel Analysis of Nigerian Banks. Data were sourced from published annual financial statements of fifteen deposit money banks, the Central Bank of Nigeria statistical bulletin and the Nigerian Stock Exchange. The study used standard econometric techniques of balanced panel regression. The finding of the study showed that, loan risk and loan risk management have a high causality and significant relationship with parameters of bank profitability. In the same vein, Kishori and Jeslin (2017) discovered various factors relevant to credit risk management and its influence on the financial performance of selected banks in India for the period of 2001-2011. Findings of the study revealed that credit risk management have a significant negative effect on the financial performance of the bank
Isah Serwadda (2018), analysed the impact of credit risk management on the financial performance of commercial banks in Uganda for a period of 2006 – 2015 using panel data for a sample of 20 commercial banks. The study employed descriptive statistics, regressions and correlation analysis. The study revealed that credit risk management impacts on the performance of Ugandan commercial banks. The results portrayed that banks’ performance was inversely influenced by non‑performing loans which may expose them to large magnitudes of illiquidity and financial crisis. Thus given such results, the study recommended that banks need to enhance their credit risk management techniques not only to earn more profits but also to maintain a qualitative asset portfolio and attention be given to non‑performing loans, loan loss provision to total loans and growth in interest earnings that were found to be significant
In the work by Mayowa and Ehi (2019), the study investigated the relationship between credit risk management and the performance of Deposit Money Banks (DMBs) in Nigeria over the period 2006-2016 using the dynamic Generalized Method of Moments (GMM) and Granger causality techniques. The study revealed a direct and statistically significant relationship between DMBs credit risk management variables measured by capital adequacy ratio, non-performing loan ratio and loan loss provision ratio and performance measured by return on asset. However, there is a significant inverse relationship between liquidity ratio and DMBs performance which is an indication that excess liquidity not properly managed as credit facility will eventually leads to a reduction in the financial performance of DMBs.
Gadzo, Oduro, and Asiedu (2019) investigated the Impact of credit risk on corporate financial performance, using data from listed banks on the Ghana stock exchange, and the data was analyzed using regression analysis. The result from the study indicates that variables such as capital adequacy, operating efficiency, profitability, and net interest margin are inversely related to credit risk. Conversely, bank size and financing gap tend to relate positively with credit risk. The study concludes that capital adequacy, operating efficiency, profitability, and net interest margin are inversely related to credit risk. Conversely, bank size and financing gap tend to relate positively with credit risk. Also, annualized changes in inflation tend to positively affect credit risk. Again, it was observed that, increase in bank credit risk negatively affects corporate financial performance. This result is however, completely different from other researchers (e,g. Li &Zou, 2014; Nwanna&Oguezue, 2017) who were of the view that credit risk have positive and proportional relationship with profitability of deposit money banks.
Hamza (2017) examined the impact of credit risk management on performance of commercial banks in Nigeria. The pooled regression was adopted to determine the impact of credit risk management on two performance methods. The findings revealed that credit risk management is inversely associated with bank performance. For return on asset (ROA) analysis revealed that capital adequacy ratio (CAR), Loan loss provision ratio (LLPR), liquidity ratio (LR) and Nonperforming loan ratio (NPLR) variables have significant impact on return on assets (ROA). The Loan loss provision ratio (LLPR), liquidity ratio (LR) and Non-performing loan ratio (NPLR) have negative while the capital adequacy ratio (CAR), loan and advances (LAR), and have positive impact on the return on assets. In relation to return on equity, the CAR, LAR and LLPR variables have significant impact on ROE. Therefore concluded that the credit risk management has inverse relationship with bank performance. Thus the management needs to be cautious about nonperforming loans, loan and advances and liquidity ratio because these ratios are severely affecting the profitability of banks. Moreover, capital adequacy contributes positively in bank performance so it should be managed.
2.4	Gaps in Literature
Despite extensive research on credit risk management, profitability, and liquidity in the banking sector, several gaps remain that warrant further investigation. First, many studies focus primarily on developed economies, with limited attention given to the peculiarities of emerging markets like Nigeria. These economies face unique challenges such as economic volatility, regulatory inconsistencies, and high levels of non-performing loans (Nwankwo, 2021). As a result, existing frameworks may not fully address the specific risks and opportunities in these contexts.
Second, while there is significant literature on the relationship between credit risk management and profitability, fewer studies explore the simultaneous impact of credit risk on both profitability and liquidity. This creates a gap in understanding the interplay between these critical financial metrics and how credit risk management can be optimized to balance them effectively (Saunders & Cornett, 2018).
Third, most studies emphasize quantitative data, such as financial ratios, while neglecting qualitative factors like management practices, staff expertise, and organizational culture that also influence the effectiveness of credit risk management strategies. Incorporating qualitative insights can provide a more comprehensive understanding of the challenges and solutions in credit risk management (Mishkin & Eakins, 2019).
Additionally, research often focuses on large, multinational banks, overlooking the dynamics of smaller or mid-sized financial institutions like Union Bank of Nigeria. These banks may face different constraints and opportunities, making it essential to investigate their unique experiences with credit risk, profitability, and liquidity.
Another significant gap is the limited exploration of how technological advancements, such as artificial intelligence (AI) and machine learning, are transforming credit risk management in developing economies. While technology is recognized as a game-changer in risk assessment and monitoring, its adoption in Nigerian banks remains under-researched (CBN, 2020).
Lastly, existing literature often fails to address the long-term impact of regulatory frameworks like Basel III on the financial performance of Nigerian banks. Although these regulations aim to enhance stability, their implications for profitability and liquidity management in emerging markets remain insufficiently examined (Bank for International Settlements, 2011).

CHAPTER THREE
RESEARCH METHODOLOGY
3.1 	Introduction to Methodology
This chapter outlines the research methodology adopted for examining the impact of credit risk management on the profitability and liquidity of deposit money banks, using Union Bank of Nigeria as a case study. The methodology provides a framework for data collection, analysis, and interpretation to ensure the validity and reliability of the research findings.
3.2 	Research Design
The study employs a descriptive research design, which is appropriate for understanding the relationship between variables and providing a detailed analysis of credit risk management practices. This design enables the researcher to collect both quantitative and qualitative data, offering a comprehensive view of how credit risk management impacts the profitability and liquidity of Union Bank of Nigeria.
3.3 	Population of the Study
The population of this study includes staff members of Union Bank of Nigeria, specifically those in credit risk management, finance, and operations departments. Additionally, the population covers financial reports, regulatory documents, and other relevant data sources from Union Bank, providing both primary and secondary data for the research.
3.4 	Sample Size and Sampling Techniques
A sample size of 150 respondents is selected from Union Bank branches in Nigeria. The sample is drawn using purposive sampling to target employees directly involved in credit risk management and financial operations. This approach ensures that the respondents possess the requisite knowledge and experience to provide relevant insights for the study.
3.5 	Method of Data Collection
Data for this study is collected through a combination of primary and secondary sources. Primary data is obtained using structured questionnaires distributed to Union Bank staff, while secondary data is sourced from the bank’s financial statements, Central Bank of Nigeria (CBN) publications, and other relevant industry reports. The questionnaire is designed to capture quantitative data on credit risk management practices, profitability, and liquidity metrics.
3.6 	Method of Data Analysis
The data collected is analyzed using both descriptive and inferential statistical methods. Descriptive statistics, such as frequency tables and percentages, are used to summarize the data, while inferential analysis, including regression and correlation techniques, is employed to examine the relationships between credit risk management, profitability, and liquidity. The Statistical Package for the Social Sciences (SPSS) is used to process and analyze the data for accurate and reliable results.
3.7 	Limitations to Methodology
This study is limited by potential biases in self-reported data from respondents, which may affect the accuracy of the findings. Additionally, the focus on Union Bank of Nigeria may restrict the generalizability of the results to other banks or industries. Time and resource constraints also pose challenges to conducting a broader and more in-depth analysis. Despite these limitations, the research methodology is designed to ensure the credibility and validity of the study’s findings.
CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND INTERPRETATION
4.0	Introduction
This chapter presents the data collected, analyzes the responses, and interprets the results in line with the objectives of the study. The data was gathered from 150 respondents using a structured questionnaire.
4.1 	Data Presentation
Section A: Demographic Data
Table 4.1: Gender of Respondents
Gender	Frequency	Percentage (%)	
Male	90	60%	
Female	60	40%	
Total	150	100%	
Source: Field work Analysis, 2025
The majority of respondents (60%) were male, while 40% were female.
Table 4.2: Age of Respondents
Age Range	Frequency	Percentage (%)	
18–25	30	20%	
26–35	55	36.7%	
36–45	45	30%	
46+	20	13.3%	
Total	150	100%	
Source: Field work Analysis, 2025
The largest age group of respondents (36.7%) is between 26 and 35 years.

Table 4.3: Educational Qualification of Respondents
Response Options	Frequency	Percentage	
SSCE/OND	23	15.3%	
HND/B.Sc.	75	50.0%	
M.Sc./MBA	30	20.0%	
Ph.D.	12	8.0%	
Others (e.g., Diploma)	10	6.7%	
Total	150	100%	
Source: Field work Analysis, 2025
The largest group of respondents (50%) hold HND/B.Sc. degrees, indicating a high level of education among the respondents. SSCE/OND holders account for 15.3%, while those with M.Sc./MBA degrees represent 20%. A small percentage of respondents (8%) hold a Ph.D., showing that most of the respondents are experienced professionals without advanced academic qualifications. 6.7% of respondents selected others, which includes diplomas or equivalent certifications.
Table 4.4: Department/Unit of Respondents
Response Options	Frequency	Percentage	
Credit Risk Management	48	32.0%	
Risk Management	40	26.7%	
Operations	30	20.0%	
Internal Audit	15	10.0%	
Finance/Accounting	12	8.0%	
Others (e.g., Marketing)	5	3.3%	
Total	150	100%	
Source: Field work Analysis, 2025
A majority of respondents (32%) work in Credit Risk Management, reflecting the relevance of the study to their roles. Risk Management is the second largest department (26.7%). Respondents from Operations and Internal Audit represent 20.0% and 10.0%, respectively. A small percentage (3.3%) work in other departments, including Marketing, reflecting diverse roles within the bank.
Table 4.5: Years of Experience in the Banking Sector
Response Options	Frequency	Percentage	
0-5 years	12	8.0%	
6-10 years	47	31.3%	
11-15 years	50	33.3%	
16-20 years	25	16.7%	
21+ years	16	10.7%	
Total	150	100%	
Source: Field work Analysis, 2025
The majority of respondents (33.3%) have 11-15 years of experience, indicating a fairly experienced workforce. 6-10 years of experience follows closely at 31.3%, which is also indicative of a well-experienced group. A smaller percentage (8%) have less than 5 years of experience, suggesting that newer employees are less represented in this survey. 16-20 years and 21+ years of experience account for 16.7% and 10.7%, respectively, showing that some respondents are long-term employees with extensive experience in the banking sector.
Section B: Main Questionnaire 
Table 4.6: Union Bank has a well-structured credit risk management system.
Response	Frequency	Percentage (%)	
Strongly Agree	60	40%	
Agree	50	33.3%	
Neutral	20	13.3%	
Disagree	15	10%	
Strongly Disagree	5	3.3%	
Total	150	100%	
Source: Field work Analysis, 2025
A combined 73.3% of respondents agree or strongly agree that Union Bank has a well-structured credit risk management system.
Table 4.7: Credit risk management policies are effectively implemented.
Response	Frequency	Percentage (%)	
Strongly Agree	55	36.7%	
Agree	45	30%	
Neutral	25	16.7%	
Disagree	20	13.3%	
Strongly Disagree	5	3.3%	
Total	150	100%	
Source: Field work Analysis, 2025
Majority (66.7%) believe the bank’s credit risk policies are effectively implemented.
Table 4.8: There is regular monitoring of loan performance in the bank
Response	Frequency	Percentage (%)	
Strongly Agree (SA)	65	43.3%	
Agree (A)	50	33.3%	
Neutral (N)	15	10%	
Disagree (D)	15	10%	
Strongly Disagree (SD)	5	3.3%	
Total	150	100%	
Source: Field work Analysis, 2025
A majority of the respondents (76.6%) affirm that Union Bank monitors loan performance regularly, indicating a proactive credit management system.
Table 4.9: Employees are trained on credit risk management practices
Response	Frequency	Percentage (%)	
Strongly Agree	45	30%	
Agree	50	33.3%	
Neutral	25	16.7%	
Disagree	20	13.3%	
Strongly Disagree	10	6.7%	
Total	150	100%	
Source: Field work Analysis, 2025
About 63.3% agree that staff receive training in credit risk management, though a fair number (20%) disagree or strongly disagree.
Table 4.10: Effective credit risk management leads to increased profitability
Response	Frequency	Percentage (%)	
Strongly Agree	70	46.7%	
Agree	55	36.7%	
Neutral	10	6.7%	
Disagree	10	6.7%	
Strongly Disagree	5	3.3%	
Total	150	100%	
Source: Field work Analysis, 2025
A strong majority (83.4%) support the idea that good credit risk management enhances profitability.
Table 4.11: There is a positive relationship between credit risk control and liquidity
Response	Frequency	Percentage (%)	
Strongly Agree	60	40%	
Agree	60	40%	
Neutral	15	10%	
Disagree	10	6.7%	
Strongly Disagree	5	3.3%	
Total	150	100%	
Source: Field work Analysis, 2025
80% of respondents perceive a positive link between risk control and liquidity, reinforcing the need for strong policies.

Table 4.12: Poor credit risk management contributes to loan defaults
Response	Frequency	Percentage (%)	
SA	75	50%	
A	45	30%	
N	15	10%	
D	10	6.7%	
SD	5	3.3%	
Total	150	100%	
Source: Field work Analysis, 2025
Most respondents (80%) agree that ineffective risk management results in higher default rates.
Table 4.13: Union Bank has a low level of non-performing loans (NPLs)
Response	Frequency	Percentage (%)	
Strongly Agree	30	20%	
Agree	40	26.7%	
Neutral	30	20%	
Disagree	30	20%	
Strongly Disagree	20	13.3%	
Total	150	100%	
Source: Field work Analysis, 2025
Responses are fairly distributed, suggesting mixed perceptions of NPL levels within the bank.
Table 4.14: Credit risk assessment procedures are regularly reviewed
Response	Frequency	Percentage (%)	
Strongly Agree	50	33.3%	
Agree	55	36.7%	
Neutral	20	13.3%	
Disagree	15	10%	
Strongly Disagree	10	6.7%	
Total	150	100%	
Source: Field work Analysis, 2025
70% of respondents agree that credit risk procedures are periodically updated, showing institutional awareness.
Table 4.15: The bank uses modern technology in credit risk evaluation
Response	Frequency	Percentage (%)	
Strongly Agree	40	26.7%	
Agree	50	33.3%	
Neutral	30	20%	
Disagree	20	13.3%	
Strongly Disagree	10	6.7%	
Total	150	100%	
Source: Field work Analysis, 2025
60% agree that Union Bank uses technology for credit evaluation, although 20% remain neutral and some disagree.
Table 4.16: Profitability is affected by the quality of credit risk management
Response	Frequency	Percentage (%)	
Strongly Agree	55	36.7%	
Agree	60	40%	
Neutral	15	10%	
Disagree	10	6.7%	
Strongly Disagree	10	6.7%	
Total	150	100%	
Source: Field work Analysis, 2025
76.7% believe credit risk management directly affects profitability, highlighting its financial significance.
Table 4.17: Liquidity challenges arise due to poor credit decisions
Response	Frequency	Percentage (%)	
Strongly Agree	50	33.3%	
Agree	55	36.7%	
Neutral	20	13.3%	
Disagree	15	10%	
Strongly Disagree	10	6.7%	
Total	150	100%	
Source: Field work Analysis, 2025
A combined 70% of respondents agree that poor credit decisions result in liquidity issues.
Table 4.18: The credit risk department collaborates well with other departments
Response	Frequency	Percentage (%)	
Strongly Agree	45	30%	
Agree	55	36.7%	
Neutral	25	16.7%	
Disagree	15	10%	
Strongly Disagree	10	6.7%	
Total	150	100%	
Source: Field work Analysis, 2025
66.7% believe there's strong inter-departmental collaboration, while others are unsure or disagree.
Table 4.19: Union Bank complies with regulatory requirements for credit risk
Response	Frequency	Percentage (%)	
Strongly Agree	60	40%	
Agree	50	33.3%	
Neutral	20	13.3%	
Disagree	10	6.7%	
Strongly Disagree	10	6.7%	
Total	150	100%	
Source: Field work Analysis, 2025
A majority of 73.3% agree that Union Bank aligns with credit risk regulations.
Table 4.20: Management responds promptly to credit risk issues
Response	Frequency	Percentage (%)	
Strongly Agree	55	36.7%	
Agree	50	33.3%	
Neutral	20	13.3%	
Disagree	15	10%	
Strongly Disagree	10	6.7%	
Total	150	100%	
Source: Field work Analysis, 2025
Most respondents (70%) agree that the management takes swift action on credit risk-related concerns.
4.2 	Data Analysis
The data collected from 150 respondents were analyzed using descriptive statistics to examine the relationship between credit risk management and the profitability and liquidity of Union Bank of Nigeria. The frequency distribution and percentage breakdown of responses were tabulated to highlight the respondents' views on the effectiveness of credit risk management practices. For instance, it was observed that a significant number of respondents agreed that credit risk management practices have a direct impact on the profitability and liquidity of the bank. This was particularly evident from the responses to questions related to the effectiveness of risk management in mitigating bad debts and improving financial outcomes. Furthermore, respondents overwhelmingly indicated that credit risk management strategies, such as regular monitoring and compliance with regulations, positively influence the bank’s financial performance and liquidity. Data analysis also revealed a general consensus on the need for constant training and updating of credit risk management practices to adapt to the evolving financial environment.
The data from the demographic section were also analyzed to understand the profile of respondents, including their educational qualifications, departments, and years of experience in the banking sector. This analysis revealed that the majority of respondents hold at least a Bachelor’s degree, primarily work in Credit Risk Management or Risk Management departments, and have substantial experience, with most having between 6 to 15 years of experience in the banking industry. The educational qualifications and years of experience suggest that the respondents have the necessary expertise and knowledge to provide reliable insights into the effectiveness of credit risk management in Union Bank of Nigeria.
4.3	Data Interpretation
The analysis of the data suggests that credit risk management significantly affects both the profitability and liquidity of Union Bank of Nigeria. Respondents strongly agreed that well-structured credit risk policies lead to better management of bad debts, which directly contributes to improved profitability. This aligns with the findings of previous studies, which highlight the importance of effective credit risk management in ensuring the financial health of banks. The significant majority of respondents also believed that poor credit management could lead to liquidity crises, confirming the critical role of credit risk strategies in safeguarding the bank's short-term financial stability. This finding is consistent with the notion that liquidity is sensitive to credit risk, and when not properly managed, credit risks can have a detrimental effect on a bank’s ability to meet its obligations.
Furthermore, the high level of agreement among respondents on the importance of regular training and technological integration for improving credit risk management practices indicates a strong awareness of the challenges in the industry and the evolving nature of financial risks. These interpretations underline the need for Union Bank to continuously refine its credit risk strategies to maintain profitability and liquidity. The findings suggest that the bank’s risk management policies are generally effective, but there is room for further improvement, particularly in adopting new technologies and enhancing employee skills.

CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Summary of Findings
This study focused on analyzing the impact of credit risk management on the profitability and liquidity of deposit money banks, with Union Bank of Nigeria as a case study. The research aimed to examine how credit risk management practices influence the financial performance and liquidity of the bank. Data was collected from 150 respondents, including employees from departments such as credit risk management, operations, internal audit, and finance. The study found that effective credit risk management practices significantly enhance profitability by minimizing bad debts and improving loan recovery rates. It also highlighted that well-managed credit risks contribute to the liquidity of the bank, ensuring that it can meet its financial obligations promptly without compromising its operational efficiency.
The findings revealed a strong correlation between credit risk management strategies and the bank’s financial performance. Respondents indicated that Union Bank’s structured credit risk policies and monitoring mechanisms had a positive impact on both profitability and liquidity. While the bank has implemented sound practices, the study also pointed out that continuous staff training, adoption of new technologies, and periodic reviews of credit risk policies are necessary to keep pace with the evolving financial environment. Overall, the study confirmed that credit risk management plays a pivotal role in ensuring the sustainability and growth of Union Bank, as it directly influences key financial indicators such as profitability and liquidity.

5.2 Conclusion
In conclusion, this study has confirmed that credit risk management is a crucial factor influencing both profitability and liquidity in Union Bank of Nigeria. The research findings clearly show that effective management of credit risks helps the bank to maintain a healthy financial position, reduces the incidence of non-performing loans, and ensures adequate liquidity to meet short-term obligations. The data analysis indicates that a proactive approach to credit risk management, including strong policies, regular monitoring, and compliance with regulatory standards, plays a pivotal role in safeguarding the bank’s profitability and financial stability. Moreover, the study also highlighted the significance of continuous training, technological advancements, and the importance of interdepartmental collaboration to strengthen the bank's credit risk framework.
The research findings also emphasize that although Union Bank has relatively effective credit risk management strategies in place, there is still room for improvement. The recommendations point toward further investment in employee training, the integration of advanced risk management technologies, and regular policy reviews to ensure the bank can effectively manage emerging risks in the dynamic financial landscape. Overall, this study underscores the vital role that credit risk management plays in the banking sector and its direct impact on the financial health of banks such as Union Bank of Nigeria.
5.3 	Recommendations
In line with the findings of this study, the following recommendations are made:
i.	Bank should continuously update its credit evaluation techniques and tools to adapt to changes in the financial environment.
ii.	Ongoing training and capacity building on credit risk assessment should be provided for staff to improve their decision-making skills.
iii.	The use of advanced credit scoring and risk management software should be encouraged for efficiency and accuracy in loan analysis.
iv.	The bank should regularly review its credit risk policies and ensure compliance with regulatory frameworks to avoid liquidity challenges.
v.	Effective communication between credit, audit, and recovery units can further improve risk identification and management.

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