dc.description.abstract | Commercial banks are the oldest and most diversified of all financial intermediaries.
A sound, progressive and dynamic banking system is a fundamental requirement for
economic development. As an important segment of the tertiary sector of an economy,
commercial banks act as the backbone of economic growth and prosperity by acting
as a catalyst in the process of development. At the macro level, a sound and profitable
banking sector is better able to withstand negative shocks and contributes to the
stability of the financial system. ALM is considered a strategic discipline that
influences the financial performance. However, ALM has her own challenges since
each client has a particular objective, risk tolerances, and constraints, and it would be
difficult to devise an optimization algorithm that would realistically account for these
specific characteristics when evaluating portfolio allocation decisions. This study
sought to establish the effect of ALM on the financial performance of the banks. To
achieve this objective, the study employed a descriptive research design to study the
relationship between ALM and financial performance of the banks. The study
collected data on assets and liabilities all commercial banks supervised by CBK for
the period between 2010-2014. Inferential statistics such as correlation and regression
were adopted to establish the relationship and effect of the ALM on the financial
performance of banks. The study found that quality of assets affects the financial
performance of banks. The proportion of NPL to total loans was found to have an
inverse relationship with financial performance. The level of liquidity had a
significant relationship with financial performance. An increase in liabilities to assets
negatively affected the financial performance of banks and vice versa. There was
significant relationship between operational efficiency and financial performance of
banks. Capital adequacy had insignificant relationship with ROE of banks. The
findings shows that ALM such as loans, liability levels, levels of efficiency have a
direct effect on the performance of banks. | en_US |