THE IMPACT OF CORPORATE FINANCE SERVICES ON BANK’S PROFITABILITY

THE IMPACT OF CORPORATE FINANCE SERVICES ON BANK’S PROFITABILITY

ABSTRACT

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

CHAPTER ONE

1.0 INTRODUCTION

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

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

1.1 BACKGROUND TO THE PROBLEM

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

– Decrease in the number of banks

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

– Automation in banking industry, computerization and technology enhancement.

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

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

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

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THE IMPACT OF CORPORATE FINANCE SERVICES ON BANK’S PROFITABILITY