Dynamics of Asset and Liability Management Determinants of Bank Profitability

A major function of banks in any economic system involves the mobilization of deposits which they deploy to deficit units for the growth of their profitability, the financial system and the whole economy. Asset and liability management is of special importance in this process and without which a bank may run into losses and even failure. Because of the fact that asset and liability management affects so many aspects of a bank, it is usually done by a committee rather than an individual or a department, but an individual from the finance department may be given the task of supporting the committee. This committee is traditionally called the Asset and Liability Committee. Asset-liability management is the effective management of the overall balance sheet, comprising the strategic planning, implementation, and the control process that affects the volume, risk, maturity, interest rate sensitivity, quality and liquidity of a bank’s assets and liabilities. 148 respondents participated in this study conducted through the exploratory research design and result showed strong positive correlation between asset and liability management and bank profitability. This study was limited by lack of current relevant literature, and further study could examine the relationship between asset and liability management and macroeconomic factors with regard to bank profitability in Nigeria. Asset allocation as asset and liability management activity should always take into cognizance off-balance engagements in order to enhance resource optimization, efficiency and bank profitability