NON-INTEREST INCOME AND FINANCIAL PERFORMANCE IN DEPOSIT MONEY BANKS IN NIGERIA.

Economics and Finance

In this study, we investigate the empirical association between non-interest income and bank profitability focusing on listed deposit money banks in Nigeria. Bank profitability is measured by return on assets (ROA), while non-interest income is measured in terms of e-banking income, fee income, commissions, and other operating income. The study is based on panel data at yearly frequency obtained from six (6) banks covering the period from 2012 to 2018. Using the panel OLS regression and the fixed effects methods, we find that different aspects of non-interest income exert differential effects on financial performance. While fee income exerts a strong and significant positive effect on bank profitability, the effects of e-banking, commission, and other operating income sources are inconsequential. Also, our findings show that the combined effect of various non-interest income moderately explains the observed cross-sectional variations in bank profitability. Based on these findings, we conclude that listed deposit money banks in Nigeria depend much more on fee income than other non-interest income sources to achieve higher financial performance. Hence, banks can achieve higher financial performance by being more prudent and efficient in managing their various non-interest income sources, particularly e-banking, commission, and other operating income

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