BANK SURVIVAL IN A DEPRESSED ECONOMY A STRATEGIC MANAGEMENT APPROACH

The Nigerian banking system has undergone substantial changes over the last three decades in terms of growth in number and variety of financial intermediaries,departments and breadth of instruments, as well as the structure, the economic environment and political environment and the regulatory framework within which the system operates. This has led to multi-dimensional changes in the economic,social,political,legal and technological life of the country. On the banking scene, the attendant effects of the aforementioned change, is the increase in the number of banks, branch network and variety of money market instruments, hitherto, unknown and never envisaged over two decades ago. It has brought about several amendments to Banks Acts, deregulation and the regulation of interest rates, capital-base and the growth of non-bank financial institutions. All these have culminated in the competition for deposits by the various participants in the banking industry. This is aptly reflected in the personal, corporate and international banking sectors. As the recession in the global economy continued unabated, the Nigerian economy was not spared. Consequently, the financial condition of a number of insured banks deteriorated following increasing non-performing loans and capital inadequacy.There were 120 commercial and merchant banks as at June 1997, 143 Mortgage banks and several community banks. The following commercial and merchant banks had been classified as "financially" distressed while most of the mortgage and community banks have had their licenses withdrawn by CBN. i) Group Merchant Bank Limited ii) Continental Merchant Ban Limited iii) Mercantile Bank of Nigeria Limited iv) Royal Merchant Bank Limited v) Republic Bank Limited vi) Pan African Bank Limited vii) Financial Merchant Bank Limited viii) Commerce Bank PLC ix)Alpha Merchant Bank Limited x) United Commercial Bank Limited xi) Capital Merchant Bank Limited xii) ICON (Merchant Bankers),etc. There is a need for a research into the causes of banks' failure and how they can survive in a depressed economy being experienced in Nigeria. Therefore, this exploratory study attempts to elucidate the structure and tends in the banking industry and the remote cause of banks' failure. It has focused attention on the strategic planning and management, which are vital to the long-term profitability and the ultimate survival of a bank.