REGRESSION MODELING ON THE DEPOSIT, WITHDRAWAL AND LOAN OF FIRST BANK NIG. PLC.

CHAPTER ONE

Introduction

1.1 Background to the study

There are different research works on the history of banking; however, all combined together to formed this topic. The history of banking was traced back as 200B.C. where banking was done in Babylon in form of monopoly. Based on another record, as far back as 13^th century, a group of Italian goldsmith who migrated pooled their resource together and set up a business as a merchant private banker in which available things like gold, trinkets and vital documents are given in return of money inform of coins and paper. Evidence like receipts was received. In recent times, banking business has expanded considerably. Attempt have been made to offered an acceptable definition starting from the time of J.M. Gilbert who defined bank as a house that deals with money i.e. it borrows money from one party and lends it to another party. But this definition tends to emphasize the two traditional functions of banks that are the mobilization of deposits and granting of loans.

In Nigeria, the bank acts of 1969 defines banks as a house of business which receive money from outside source as deposits irrespective of the payment of interest, granting the money as a loan and acceptance of creditor purchase of bills and cheques. In a nutshell, bank is a financial institution where individuals or cooperate bodies can deposit money as a save house, and channels those deposit into lending activities, either directly or through capital market. Bank grant security to our money by ensuring that fund passes hands in legal and structure manner, and also save us an incredible amount of time. Those banks are in a position to lend out money at interest rates higher than what is paid to saving account. The bank also takes caution when lending out, whenever it want to borrow money out, provision of Collaterals must be provided which serve as a security in case of default. The banks receive deposit, valuable document and jewelries for safe keeping. And owners paid certain charges to the banks for safe keeping of valuable asset.

And one of the basic economic problems confronting individuals, firms and even the government is how to allocate scarce financial resources among competing ends in order to maximize wealth (Akinlo, 2005). For profit maximizing institutions like banks, this problem is basically that of portfolio management. This challenge is more pronounced in the banks sector because their major source of funds is through customers’ deposits, which is mostly short term in nature. They are also payable on demand in the case of demand and savings deposits or after a very short notice in the case of time or fixed deposit (Udoka, 2007). It should be remembered that the basic objectives of bank portfolio management are to provide the bank with liquidity, solvency and income (profitability) (Mbat, 2009). Liquidity implies that a bank’s portfolio policies should be designed so as to enable the bank to maintain adequate degree of liquidity, necessary to meet varied demand for funds. Specifically, a bank should maintain highly liquid assets in sufficient amounts to meet depositors’ withdrawals as well as legitimate loan requests. Solvency denotes that bank portfolio policies must be guided by prudence such that lending and investment are undertaken only when there is almost a complete assurance that the principal and interest will be repaid as they fall due (Albu, 2006) Thus, while the achievement of adequate liquidity level is a short – run objective, the achievement of solvency is a long – run objective of the bank management.

The objective of profitability implies that bank policies should be geared towards achieving sufficient income on bank portfolios, so that operating costs can be met and banks can also continue as a going concern. In order for banks to achieve the above dual objectives, they must achieve a certain pattern and the distribution of their assets. Portfolio management is therefore the combination of various classes of assets in order to achieve an optimum balance between liquidity and solvency on the one hand, and income on the other.

1.2 Historical Background of First Bank Nigeria PLC.

The history of first Bank of Nigeria Plc can be traced to Lagos, Jos and Port-Harcourt where the first operation started in 1971, with the operating of the branches in those cities, these branches were opened as colonial Bank Offices in 1925, Barclays Bank these branches were opened as colonial Bank Offices in 1925, Barclays Bank DCO (Dominion Colonial Overseas) acquired the Bank part of the country. The branches were opened in 1926, Ijebu ode in 1931, Bida branch in 1953, Katsina 1955, Sapele in 1957. Etc. The Bank was formally incorporated in Nigeria in 1969 due to the Nigeria enterprises promotion decree of 1972 and 1977, government acquired 5% of the Bank share living only 40% for Barclays bank international limited which about 8% was left for the Nigeria public.

This will increase to 28% by had dropped to 20% as a result of this new development the name changed to First Bank of Nigeria. However, the 20% belonging to Barclays Bank was sold off in 1989, this making the bank wholly owned by Nigerians. However, Barclay continues to offer Technical’s and correspondence service to the bank. The new outfits First Bank of Nigeria continue to enjoy patronage from the public as it predicts due to largely available image of being an important and reliable source of capacitor for commerce manufacturing.etc. The bank was able to carry on in its leading role because of it success in mobilizing various deposits and channel it toward portable investment outlets, no doubt enjoy equitation of an agent of economic growth and development.

A saving account at a banking institution that allows money to be held on because of the account holder, some bank most especially First Bank of Nigeria Plc change a fee for thus services, or may pay the Client interest on the fund deposited. The account holder returns rights to their deposits; although restriction placed on access depend upon the terms and condition of the account and provider.

The banking terms are as follows:-

- Cash Deposit

The above terms are actually tend to obscure the economy substance and legal essence of transaction in a deposit account from a legal and financial accounting stand point and as counter initiative as it may seem term deposit is actually used by the banking industry in financial statement to describe the liability owned by the Banker to its deposits. You must fill in the cash pay in form in duplicate, submit over the counter together with your cash for deposit to the teller, who will account the cash, proof read the voucher, and hand back to you a signal and stamped return receipt as your reference for account keeping.

-Cash Withdrawal

This when cash is taken out your account at standard bank, or at other bank ATM at a branch using ATM card at the teller or cashing a cheque. There is provision for enabling participation to withdrawer part or all of on accumulation from an insurance policy or annuity.

-Loan

Through loan, money is lent out to customers at an agreed rate of interest for a specific period. In this case, the borrowers’ current account will be credited by the amount of the same loan, at the same time; a loan account for the amount will be opened. The customer is required to have collateral security before he can be give loan. The customer will pay interest on the amount he has borrowed. The bank differentiates between charges that cover costs and those that cover risk. Whereas interest reflects the risk of granting the facility, the service fee covers the costs for the maintenance and administration of loans. These facilities are regularly scrutinized and reviewed and systems are required to make sure that limits are not exceeded and that repayment arrangements are adhered to as per the agreement between the bank and the customers.

1.3 Statement of Problems

As earlier pointed out, there is delay in payment of cheques which leads to the adoption of electronic banking system. Adoption of electronic banking which suppose to ease banking transactions rather resulted to woes to customer. Most people complain of time wasted to bank. This occurs when there is power failure in banks resulting to slow down in operation. Other factors are the values of investments, Economic conditions and the uncertainty in the financial principles of the reforms in the banking sector. Apart from above mentioned conditions the banks also want to maintain a save liquidity level, so as to able to grant loans and advances to individual and cooperate organization.

1.4 Significance of the Study.

The principal benefits of this research are as follows:

1) To develop model which will show the extent of relationship between deposit, withdrawal and loan of First bank Nigeria Plc which will go in a long way to help the financial institution to plan which will be of her benefit and the country at large.

2) This study is also expected to stimulate academic research interest in other aspect of bank services.

3) This study will be useful to financial institutions, firms and professional managers who are constantly, aiming at efficient and effective approach to profit making. Government, organizations and private individuals concerned with formulating banking polices and strategies can also benefit from this.

4) The study will further enhance the variability of banks credit policy by pointing out its shortcomings and difficulties.

5) The findings of the study would provide data base for further research work.

1.5 Limitation of the Study.

1. Seeking permission from those that are in positions to gives vital information relating to research.

2. Study of this nature is usually fraught with problem of that collection especially in a country like Nigeria where a great majority of people are yet to appreciate the benefits of research.

3. Time constraints were also limiting factors in this study.

1.6 Scope of Study.

The scope of any research work is to give an account of the extent of its coverage. In this research work it is limited to Nigerian Banks and covers only the deposit, withdrawal and loan in Nigeria from 2010 – 2012.

1.7 Aim and Objectives of the Study.

The general aim of this research is to find the most suitable explanatory variable among the variables with a focus on the relationship and examine the nature of relationship between deposits; withdrawal and loan of First bank Nigeria Plc.

The specific objective of this study will include:

To determine the relative importance and the impact of some factors affecting loan and to put the variables in other of importance.
To test whether there is little or no multicollinearity in the multiple linear regression
To test the multivariate normality of the model

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