Effect Of E-banking On Bank Profitability
[A STUDY OF GUARANTY TRUST BANK PLC ENUGU]

However, researchers have not given much attention to this change caused by internet banking with regard to profitability performance of banks. The changes in industry in Nigeria occasioned by the idea of internet banking has forced Nigerian banks to invest more on assets to meet up with competitive positioning. Since many earnings have been retained to meet up this obligation, shareholders have been denied dividend with the anticipation of fatter future dividend.

The banking software which is usually improved on a short term basis causes huge financial costs to the banks. To the capital providers, they expect extremely large returns from the project if the internet is adopted. Annual financial reports of Nigerian banks in recent years have shown that dividend returns are dwindling while other performance indicators seem to be weak contrary to the expectation of the shareholders or investors.

Generally, there appears not to be improvement on banks’ return on equity and assets as speculated.

1.2       Statement of Problem

A great majority of the recent works on electronic money and banking suffers from a narrow focus. It usually ignores internet banking in every way and equates electronic money with the substitution of currency. For instance, Freedman, (2000) put forward that e-banking and electronic money consists of three devices; access devices, stored value card, and network money. Internet banking is simply the use of new access device and is therefore ignored.

Electronic money is the sum of stored value (smart) cards and network money (value stored on computer hard drives). Within this constricted room for internet banking and electronic money, there are however many research that addresses one or more of the challenges facing it. Santomero and Seater, (1996), Prinz, (1999) and Shy and Tarkka, (2002) and many others have produced models, that ascertain conditions under which different electronic payments substitute for money. Most of these models show that there is at least the possibility for electronic substitutes for currency to emerge and succeed on a large scale, depending on the features of the various technologies as well as the trait of the potential users.

Friedman, (1999) point out that internet banking presents the chance that a totally different payment system, not under the control of the Central Bank may arise. King, (1999) argues, that today computers make it at least possible to avoid the payment system altogether, instead using direct bilateral clearing and settlement.

1.3        Objectives of the Study

The main objective of this study is to examine the effect of internet banking on profitability of commercial banks in Nigeria, using Guaranty Trust Bank (GTB) plc. as a case study. The specific objectives of the study are:

        i.   To examine to which extent internet banking influences bank ROA.

        ii.   To examine the magnitude to which internet banking influences ROE.

        iii.   To determine if ATM transactions has any significant impact on ROE.

​​​​​​​1.4           Research Questions

In order to achieve the stated objectives for the study, the following questions are to be asked:

         i.  To what extent does internet banking affect ROA in Guaranty Trust Bank?

        ii.  To what extent does internet banking affect ROE in Guaranty Trust Bank

        iii. To what extent does an ATM transaction affect ROE?​​​​​​​

​​​​​​​1.5            Research Hypotheses

        i.  H0: Internet Banking has no significant impact on Return on Asset of Guaranty Trust Bank.

            H1: Internet Banking has a significant impact on Return on Asset of Guaranty Trust Bank.

        ii.  H0: Internet Banking has no significant effect on Return on Equity of Guaranty Trust Bank.

             H1: Internet Banking has a significant effect on Return on Equity of Guaranty Trust Bank.

        iii.  H0: ATM transactions have no significant effect on Return on Equity of Guaranty Trust Bank.

             H1: ATM transactions have a significant effect on Return on Equity of Guaranty Trust Bank.