JEFMS Journal

ABSTRACT:

This paper investigated the effect of non-interest Income on the performance of 6 selected deposit money banks in Nigeria, between 2015 to 2019. A panel regression model was used to determine the effect of non-interest income of the DMBs’ profitability. The variables used are: fee income, commission income, e-income, and foreign transaction income which also influence the profitability of banks were considered in the model for the study using Tobin-Q as the independent variable. The analyses was done using a panel regression model on the EViews 10+ software. The coefficients reveal that with fee income as a ratio of total non-interest income (F-IN/TINC) has a positive effect on bank financial performance with slope coefficient of 6.0995 and significant at 5% (p=0.000), while that of E-income as a ratio of total non-interest income (E-IN/TINC) has a positive effect on bank financial performance with slope coefficient of 6.6879 with p value of 0.0002). Similarly, foreign transaction income as a ratio of total non-interest income (F-IN/TINC) has a positive effect on bank financial performance with slope coefficient of 6.0995 p-value of 0.000. This implies that increases in Fee based -income, E-based income and foreign transactions-based income will result in an improvement in bank financial performance. However, the operating income as a ratio of total non-interest income (OP-IN/TINC) has a negative effect on bank financial performance with slope coefficient of - 2.6035 with p-value of 0.000 at 5% critical value. The study therefore recommends among others that deposit money banks should be actively involved in customer analysis and market research in order to develop those products and services that will continually satisfy majority of their customers so as to generate high non-interest income from such service.

KEYWORDS:

Tobin-Q, non-interest income, profitability

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