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CHAPTER ONE

1.0 1.1 1.1.1 INTRODUCTION DEFINITIONS Traditional Banking

In the traditional banking system, a customer can open any bank account in banks take the facility of saving his money by depositing money in local bank. He can withdraw his money through cheques, counter payment and through bank draft. He can meet the bank manager for solutions to his problems. He can take the physical help for getting loan from bank. 1.1.1a The Pros and Cons of Traditional Banking Even if convenience and time efficiency is at stake particularly for those who love to engage in multi task, some people still prefer traditional banking methods as compared to online banking services. For some, security is always the issue that is why they prefer to actually interact with real tellers. If ever there is a problem. They can easily ask for assistance from a bank representative to sort out their problems although this can take longer time than expected particularly when all hand are busy with various office tasks. Some people also feel comfortable when they actually see the money change hands as compared to online banking wherein all the proof that they get about their transactions is the receipt provided to them by the site after completion of a certain transaction. 1.1.2 E-banking

E-banking means internet banking or modern banking or online bill. In this method ,customer get his bank account ID and password and he can check his account , pay his bill and print his receipt through his home personal computer which is connected with internet. E-banking is development of today banking system. In other words, e-banking is electronic banking whose facility, you can take through your regular broadband internet connection. Internet banking works much like traditional banking. The primary difference is that you are accessing your account and information, making payments and reconciling statement using your computer rather than paper or the phone to complete transaction. Instead of going down to your local branch office when you bank online you can accomplish multiple tasks at once with the click of a button.

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Online banking is rapidly becoming more and more popular as consumers recognize the advantages online banking has to offer. For one most banking charge fewer fees if you take advantage of their online banking services. You can also stop receiving paper statement if you like in many cases and conduct 95% of your business over the web when you take advantage of internet banking. 1.1.2a The Pros and Cons of Online Banking The major benefit one can enjoy with online banking is convenience because more often than not, customers can easily complete multiple tasks even without leaving their homes to visit the local branch of their bank. Efficiency and convenience is what sets apart online banking from traditional banking because in internet banking, customers are able to pay their bills, move, deposit, or withdraw money to another account, reconcile multiple bank accounts, and a lot more related services customer can enjoy in order to expedite their bank transactions even when they are just at home. With online banking, various transactions are more efficient and it also saves the valuable time of customers which they can use to other tasks. In seconds, every bank transaction can be complete and the customer can even print his or her receipts for recording purposes. The customer can also enjoy unlimited access to his or her bank account at anytime of the day and including holidays or weekends. In addition to this, even if you are in another country, you can access your account as long as you have an internet connection. Online banking can significantly expedite banking transaction and it is also rather cheap when it comes to bank charges as compared to traditional banking. Most bank with online services offer lesser fees for every online service they offer. Beside, banks often have high interest rates particularly on savings accounts and bank CDs or certificates of deposits and they can also offer added financial services and other related financial product to its customers. And as for customer s, they will not need to buy stamps or envelopes or even rush to post office to send in their payment by mail. This lessens the risk of late payments. Customers can also electrically access their bank statement and reconcile it faster than ever before. The downside to online banking with all the sophisticated software, security programs and tools used by online banks, there is always the risk of theft which can put your account and all that‟s in it in danger of being hacked. The problem actually do not lie on the online bank itself but rather on user who are not too keen on practicing safety measures in other to safeguards their account information. Aside from identity theft, different threat related to online banking also include hacking and phishing of online bank accounts by expert hackers who are clever enough to penetrate the user‟s computer and person information.
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Efficiency is what makes online banking attractive to customers: they can pay bills. you can now access your account and perform your bank transactions using your computer. provided that internet connection is available. Moreover. Furthermore. Finally. The choice of online vs. traditional and online banking has its own shares of advantages and drawbacks which should be carefully considered. convenient and inexpensive. brick-and-mortar banking is often based on one‟s lifestyle and priorities. Online Banking The type of services offered by online banking actually is similar to the services offered by traditional banking. and risk being late on their payments. run to the post office at the last minute. Online bank accounts make banking expedient. Internet and traditional banking have their pros and cons to consider. Banking is fast and saves customers valuable time. move money between different accounts.3 Traditional Banking vs. accessing his account and personal details. 3 . even during weekends and holidays. Many banks charge fewer fees for the online services they offer. Internet banking works in a similar manner as traditional banking. the customer can accomplish multiple tasks in the comfort of his home. or reconciling account statements. Other threats associated with online banking include phishing and hacking of online accounts. As a major advantage of the internet banking. online banking employs sophisticated tools that help manage one‟s money account with ease. Monthly bank statement can be accessed electronically. banks have higher rates on savings accounts and certificates of deposit. you can be able to complete various bank transactions with just a click of the mouse. identity theft is still a concern. and much more. the online account may be accessed any place around the world. But just like any other customer related services. The customer may access his account at a given time of the day. obtaining update information of the account. Choice between internet and traditional banking service depends on the priorities and the lifestyle of the customer. Rather than visiting the local branch of his bank. The major difference lies in the convenience offered by online banking particularly when it comes to making payments.1. At the comfort and privacy of your own home. and reconciling statements. Rather than personally visiting your local bank. check multiple accounts. the major difference being the way one is making payments. Customers don‟t need to buy envelopes and stamps. Transactions are completed in seconds and can print out receipts of his personal records. Despite increased security measures and the availability of anti-virus and anti-spyware programs. and offer more financial services and products. the customer uses his computer to complete transactions.1.

Time is among the precious commodities. Inconvenient locations. especially for multi-taskers. AIMS AND OBJECTIVES Comparative study of banking techniques. it is beneficial to customer of the bank because it will give them a picture on how banking activities are carried-out in the bank.3 STATEMENT OF THE PROBLEM The study and application of statistical approach in analysis of banking activities such as comparison cannot be over emphasized. fixed schedules. To fit a regression model to the banking techniques. 2. the study is significant to the entire member of staff of Skye bank Nigeria Plc. and more limited financial services are some of the disadvantages associated with traditional banking. Also. 3. Customers can turn to the bank‟s special account representative or even to the manager. since it will help them identify which banking method to adopt presently and in nearest future. On the other hand. 1. 1. 4 .4 1. some people prefer to visit their local bank and internet with the teller in person. Organization tends to study the market and kind of services they render to see how they can modify or upgrade their services. In contrast to internet banking.2 SIGNIFICANCE OF THE STUDY The study uses statistical method to compare traditional banking with e-banking using Skye bank Nigeria Plc. customers option for traditional banking services need to draw money before using it. To determine the relationship between the banking techniques. An important tool for carrying out such a study is using the statistical approach which is done by professional statistician. Hence. 1. as case study. The major draw-back in this approach is that seasoned statisticians are difficult to come-by. Clients are physically present when cash is handed over to them and when they place valuable items in their safety deposit boxes.

Getting the data required time.2 LIMITATION Getting sensitive data such as this is very cumbersome since it can equally be used to tell the bank performance.5 billion). the Gambia ad the republic of Guinea.1 SCOPE Skye bank Plc. with shareholders‟ equity of approximately USS630 million (NGN: 98. That same year. commonly known as Skye bank is a commercial bank based in Nigeria. But in all. The bank also offers internet banking and mobile banking.9 billion (NGN: 611. Angola and Equatorial Guinea. the knowledge gained is worth it. 5 . patience.t.”. The origins of Skye Bank data back to 1989 when Prudent Bank Plc. it rebranded as Prudent Merchant Bank Limited. Skye Bank is a large financial services provider in West Africa and Central Africa. With headquarters in Nigeria.. who chairs the sixteen (16) members Board of Directors.4 billion).c. Also. In 1990. the bank introduced a Naira-denominated MasterCard debit card.. Moronkeji Onasanya. was incorporated as a limited liability company. the first of its kind in Nigeria.5. the bank‟s total assets were in excess of USS3. The Chief Executive Officer and Group Managing Director is Kehinde Durosinmi-Etti.5. The chairman of the board is Mrs. In 2005 Prudent Merchant Bank Limited merged with four other banks to form Skye Bank Plc. It is one of the twenty-six (26) commercial banks licensed by the Central Bank of Nigeria. the country‟s banking regulator. Bond Bank Limited Reliance Bank Limited Co-operative Bank Plc.5 SCOPES AND LIMITATION 1. sourcing for relevant journals proved to be an uphill task. called “MasterCard. the bank maintains subsidiaries in Sierra Leone. and finance e. namely:     EIB International bank Plc.1. As of September 2010. In January 2011. Liberia. the bank was issued a license as merchant bank. 1.

but the bank may withdraw the money from the account the day that request is received. he/she may have to put in a check request as such as two weeks before the payment is due. In addition. Some online banks are traditional banks which also offer online banking. day or night. customers could sort the data of any 6 . researchers and individual from different works of life in Nigeria and the world at large have contributed to the study. while others are online only and have no physical presence. such as account transfers. and future payments can be scheduled to occur automatically. and some even offer online loan and credit card applications. Online-only banks only a few additional drawbacks: an account holder has to mail in deposits (other than direct deposit). A few online banks update information in real-time. Also. Examples include the use of drop-down menus and a page sensitive “Help” function. balance enquiries. scholars. while others do it daily.1. Once information has been entered. When the internet banking solution operates in batch mode. to simplify record keeping. some banks only offer online banking in a limited area. Partnership is achieved when the software “work with you. Online banking through traditional banks enables customers to perform all routine transactions. writers. Some of which includes: Howard (1974) in his article on online banking was of the view that online banking is a system allowing individuals to perform banking activities at home. near real-time data can be accomplished if the solution performs inter-day memo posts. Ideally. Danforth (1977) in his write-up on choosing a profitable internet banking solution concluded that internet banking software can be rated according to the extent it satisfies increasing level of excellence in user experience. it doesn‟t need to be re-entered for similar subsequent checks.6 LIETRATURE REVIEW Many authors. and can be done from anywhere. when an account holder pays online. It does not take some time to set up and get used to an online account. such as traveler‟s checks and cashier‟s checks. bill payments. Accuracy is achieved where all information is correct and timely.” White space must be managed so that data is easy to read and data entry boxes are symmetrical. and some services that traditional banks offer are difficult or impossible for online-only banks to offer. and stop payment requests. Many banks allow for file transfer between their program and popular accounting software packages. Accessibility allows you to do what you want to do from the page that you want to do it with maximum effort. via the internet. there are few drawbacks. Despite the advantages. Customer should control certain things such as custom account naming and changing their secret question. meaning the person has lost up to two weeks of interest on the payment. A filter page should be included where customers can customize display of their transactions. Account information can be accessed anytime.

S. Put another way. and that these activities can be regulated as effectively as can traditional activities. Edwards (1989) in her write-up on the decline of traditional banking outlined the fundamental economic forces that have led to the decline of traditional banking that is the process of making loans and funding them by issuing short-date deposits. were the only entities legally able to issue checking accounts prior to the 1980s. Advice is the software proactively teaches you. Instead of “how-to” internet banking instructions. credits and payment type should be available. chartered at the national. or local levels. This paper argues that nontraditional activities. either by making more risky loan or by engaging in “nontraditional” financial activities that promise higher return but greater risk. the approach by Allen and Santomero focuses on the expertise that bank examiner must possess to supervise adequately the complex banks of the future. expose banks to risks and moral hazard problems that are similar to those associated with banks‟ traditional activities. and mutual savings banks. In contrast. While still dominant in the banking industry. Polis (1978) in his journal on traditional banking summarized that it is the original type of commercial bank that handle customer deposits and made investment loan to businesses. such as banks acting as derivatives dealers.Santomero framework implies less emphasis on supervising asset quality and more emphasis on supervising market risk exposure and risk management systems. One regulatory approach to 7 . The declining competitiveness of traditional banking may threaten financial stability by increasing bank failure and by increasing the incentives of banks to take on more risk. state. According to woods (1986) in his article on maintaining banking standards concludes that banks supervisors must continue to adjust to the growing dominance of complex banks. Indeed. traditional banking remains extremely viable. as illustrated by the high earnings posted by banks of all shapes and sizes over the past decade. Poposka et al (1982) in their article on the two faces of banking clearly summarized that the industry is evolving from one that is engaged primarily n traditional activities to one that is engaged in complex risk intermediation. debits. customers can watch online tutorial “movies. That is not to say that traditional banking will disappear. the Allen. credit unions.column in ascending or descending order. Focusing simply on changes in the asset concentration of the industry understate the changes necessary in supervision because that approach implies a simple need to relocate the exiting examiner resources as the bank relocate. banking industry seems likely to include both traditional and complex activities for some time to come. Traditional bank. traditional banks are joined by savings loan associations.” Richer information related to trends over time for customer balance. The U.

It was found that certain factors did have a positive relationship with the adoption of internet banking and such as strategy in the banking services sector can be refined to better meet the demands and profile of the Hong Kong market. The results show that transactional internet banking did not have a significant impact on any of these. Performance was measured using the linear programming technique of data envelopment analysis and regressed on relevant explanatory variable using censored normal regression. banks could be permitted greater freedom to expand into nontraditional activities. Thus. perceived ease of use. Sathye (1993) in his write-up on internet banking on performance and risk profile this paper investigates the impact of the introduction of transactional internet banking on performance and risk profile of major credit union in Australia.maintain financial stability and strengthen the banking system is to adopt a system of structured bank capital requirements with early corrective action by regulators. perceived risk and personal innovativeness in information technology and The potential impacts on the strategic activity of banking organization operation in the Hong Kong market. Yiu (1991) in his journal on the factors affecting the adoption of internet banking in Hong Kong summarized that the rapid development of Internet and Electronic Business has stimulated the banking and financial sectors toward encouraging customers to bank on-line. This paper explores the adoption of internet banking by retail customers in Hong Kong from three angles: (i) (ii) (iii) The current adoption rate of internet banking: The influences of perceived usefulness. Hypotheses were constructed and tested using t-test and person‟s correlation. It neither reduces nor enhances risk profile. An important element in the approach is that market-value accounting principles would be applied to banks and there would be increased public disclosure by banks of the risks associated with their trading activities. internet banking has not proved to be a performance-enhancing tool in the contest of major credit onion in Australia. Accounting data were used to measure risk profile and regressed on relevant explanatory employing OLS regression. Chiemeke et al (1995) in their journal on the adoption internet banking in Nigeria this study examine the level of adoption of internet banking in Nigeria. With this regulatory structure in place. The research constructs were developed based on the technology acceptance model and incorporated two additional elements of person innovativeness and perceived risk. Twelve large on-line banks retained their names after the consolidation were studied in terms of the 8 .

and many banks were offering transaction services at the advanced level. The model used to that proposed by Diniz in 1998. stated that the technology is understandably a very important tool for every banks competitive strategy. He noted that banks improved in their websites and they are only in the beginning in terms of functionality.A the were already running a website. (2002) developed statistical model to explain why banks choose to adopt internet banking and why some choose to offer a relatively wider array of internet 9 . He also submit that the poor in Nigeria are financially forbidden from participating and that he recent rollout of global system of mobile communication (GSM) in Nigeria cannot solve the telecommunication problems. He noted that Nigeria banks cannot immediately reap the digital dividends because of poor telecommunication infrastructure. Main factor that inhabit the adoption of traditional banking in Nigeria are security and inadequate facilities including proper telecommunications and power. al. effective communication integrity and availability. should be considered in order to satisfy customer‟s requirements. et. However. further improvement on security and provision of key ingredients of internet banking which includes confidentiality. the study revealed that bigger banks were doing better at the basic intermediary levels.A). His work divided the functionality of the websites in such a way to give insight on three different opportunities that the technology could bring to banks.functionality and interactivity of their websites. Most of the banks perform extremely well in providing up-to date information. The areas are.S.S. Furst. with an additional factor on security measures. in his paper on the practices and potential of internet banking in Nigeria. The research surprisingly noted that Australia‟s biggest and most profitable banking bank was yet to start internet banking. Ovia (2001). (i) Information delivery (ii) transaction (iii) customers relationship With 121 banks selected from all over the U. Sathye (1997) surveyed the state of internet banking in Australia and discovered at the end of September 1997 only two (2) banks had started internet banking services out of 52 banks in Australia. Diniz (1998) presented a survey of websites of banks in the United State of America (U. if Australian banking is not look medieval in the just changing world. The result revealed that internet banking is being offered at the BASIC level of interactivity with most of the bank having mainly information sites and providing little internet transactional services. He therefore advised that serious attention be given to internet banking. given the high cost of tariff. The level of security of banks was low as most of the banks have not adopted 128 bit Secure Socket Layer (SSL) encryption security measures.

and 14 banks were deployed ATMs were selected. The research submitted that future research is needed in order to identify more specific issues regarding the adoption of internet banking in the financial sector in general and the pattern of diffusion of such innovation among banks in Italy.banking product and services. although there is also some evidence that banks providing innovative financial services are inclined to adopt the innovation than traditional banks. Corrochre (2002) investigated the drivers of the adoption of internet banking. Data collected instrument was a structured questionnaire administered to 600 respondents of which 428 were returned giving 71. In order to understand its role with respect to the traditional activity and to offer a comprehensive picture of the diffusion of such a technology within the sector. using Automatic Taller Machines (ATMs) as the target innovation. it was revealed that the respondents believed in their safety in using ATM. the study revealed that internet banks have better accounting efficiency ratio and higher return on equity than non-internet banks. The study investigated the relationship between the internet banking and the traditional banking activity in Italy in order to understand if these two systems of financial. Olatokun (2003) in his article on the adoption of Automatic Teller Machines in Nigeria concluded that this study tested the attributes of the theory of diffusion of innovation empirically. The result revealed that most of the banks had up-to-date information on their websites and identified security and complication of internet banking as most of the inhibiting factors. The study was situated in Jos. Plateau state. Principle Factor Analysis and Multiple Regression were the analytical techniques used. In addition. The result revealed several significant differences in the profit of banks that offer internet banking and those that do not. The study revealed banks seem to perceive internet banking as a substitute for the existing branching structure. The population comprises banks customers in Jos who used ATMs. The sample frame technique was applied. Cluster sampling was employed to select respondents for the study. Nigeria. that ATMs were quite easy to use and fit in with 10 . From the factor analysis.3% return rate. They also investigated whether offering internet banking affects a bank‟s profitability. The demographic characteristic of the respondents revealed that most of them were students and youths. They observed that internet banks rely more heavily in non-interest income and less on core deposits for funding than non-internet banks do. Chung & Paynter (2002) surveyed the state of internet banking in New Zealand by examining the websites of seven on-line banks using a tailored electronic-commerce model. services deliveries are perceived as substitutes or compliments by the bank.

The research was carried out in two parts. noted that members of banks in Oman are considering going online. Complexity. Khan (2004) tested whether consumer adoption of online banking is affected with one‟s bank branch. which in turn had almost the same weight of impact on Attitude. although internet banking is still a relatively recent phenomenon in Arab countries. They however. only two banks offer internet banking services.their way of life. The constructs Relative Advantage. The first part evaluate internet banking services using the existing Hersey‟s tailored model. The author noted that. while the second part presented the Tunisian online brokerage network. To increase the diffusion of ATMs. 5% of the respondent report used online banking as a channel for doing business with their main financial institutions. and Trail ability were all found to have a significant impact on the Attitude towards ATM. not necessarily because of the immediate commercial benefits. but more because of the opportunity for developing customers trust in order to ensure the success of future innovation. Compatibility. The research estimated a model for online banking use with household level data from the USA from 1998 to 2001. while Observability had the highest impact on attitude. less complex and easy to use. being a first mover (the bank pioneered internet banking in Nigeria in November. this share increase to 17%. The study analyzed the websites of banks on the United 11 . The source of data was the survey of consumers finances (SCF) from the Federal Revenue Board. The study revealed that in Oman. The results however reveal that distance to the closest bank branch does not affect likelihood of online banking used by the household and that household income and education positively and significantly affects adoption. The result show that in the 1998 SCF. 2000) in a given market can be crucial. The study revealed that internet based services in the Tunisian financial sectors are still in the early stage of development and significant effort be made in order for the technology to take off. By 2001. that what they observed about ATMs convinced them to use it and that ATM was tried out before they use it. Awemleh & Fernandes (2005) adopted Diniz model to evaluate websites for foreign and local banks in United Arab Emirates (UAE). it was recommended that banks should ensure enhanced salience of ATM to customers „needs. Haung et al. Achour & Bensedrine (2005) evaluate the current situation of internet based financial services in Tunisia. greater compatibility of ATM to customers banking norms and lifestyle. Al-Sahbagh & Molla (2004) explore the drivers and inhibitors of customers‟ internet banking adoption in the sultanate of Oman. (2003) reports on the experience of first Atlantic bank of Nigeria as it embarked on the implementation and introduction of internet and mobile banking services.

infrastructure and interface of internet banking in the UAE to be established for customers to be encouraged to take full advantage of this technology. aesthetics. The result revealed that internet banking in the UAE is still in its infancy. The derived dimensions include: for customer service quality. ease of use. Also revealed that. terms of frequency of reference to the 17 dimensions. six dimension such as content. banking service product quality. as the main sources of satisfaction or dissatisfaction. one dimension of product variety/ diverse features. and online systems quality. for online system quality. and security. responsiveness. customer satisfaction.Arab Emirates using the Diniz model to access the extent of adoption of internet banking. timeless. The most frequently mentioned dimensions. Some suggestions and recommendation were provided to improve the internet banking service quality and. access. no substantial differences exist between internet-only banks and traditional banks offering internet banking service. Customer anecdotes of critical incident in internet banking were content-analyzed. and continuous improvement. which can be classified into three broad categories customer service quality. and for banking service product quality. and accuracy. were reliability. Jun (2006) in his article on key determinant of internet banking service quality focuses on the issues associated with internet banking service quality. 12 . The authors want proper development in the design. ten dimensions such as reliability. accuracy. in turn. Identified a total of 17 dimensions of internet banking service quality. competence. responsiveness.

1 METHOD OF DATA COLLECTION The method of data collection used for this research work is the method of registration. with the rate of return or interest for your investment.1 Treasury Bill Treasury bill (T-Bills) is short-term debt obligations. They provides correspondent bank balances that enable the transfer of funds between banks (resulting from the collection of cash item and cash letters) the transfer and settlement of securities transactions. the borrower initially receives or borrows an amount of money. making these attractive to both individual and corporate investors seeking a safe haven for their cash. called the principal. paid directly into your account upon maturity. a loan entails the redistribution of financial assets over time. or partial repayment. the purchase or sale of federal funds. the transfer of participating loan funds. between the lender and the borrower. In a legal loan. 2. The purchase price is typically deducted from an online account. and are extremely liquid. and many other causes. which provides an incentive for the lender to engage in the loan. from the lender.2. which can also place the borrower 13 . and Canadian governments.2. in an annuity.2 Cash and dues from Bank Cash and dues from banks are bank assets that consist of demand and time deposits maintained in other banks to facilitate the transfer of fund.3 Loan to Customers A loan is type of debt. referred to as interest on the debt. each installment is the same amount. each of these obligations and restrictions is enforced by contract. It is a published data because it is for the consumption of both Skye Bank Nigeria and her Customers. issued by both the U.S. and is obligate to pay back or repay an equal amount of money to the lender at a later time.2 DATA COLLECTED 2. 2. like all debt instruments. Typically. the money is paid back in regular installments.CHAPTER 2 2. The loan is generally provided at a cost. Treasury bills are fully backed by the governments. with maturity period up to a year. In a loan. 2.2.

Banks often purchase marketable securities to hold in their portfolios. Investment securities held by bank are usually one of two main sources of revenue. operating subsidiaries engaged only in activities the bank may engage in directly under the same terms and conditions applicable 14 .  The lessor (finance company)will purchase that asset. in practice any material object might be lent. limited liability Company. 2. For other institutions. However the lease has control over the asset providing them the benefit and risk of (economic) ownership 2. Investment securities provide banks with a source of liquidity along with the profit from realized capital gain when they are sold. A financial subsidiary may conduct activities that are permissible for national banks in addition to those that are “financial in nature” or incidental to financial activities. paying the last rental.g. Although this article focuses on monetary loans.5 Investment Securities Securities that are purchased in order to be held for investment. It is a commercial arrangement where:  The lessee (customer or borrower) will select an asset (equipment.  The lessee will have to use of that asset during lease.4 Finance Lease A finance lease or capital lease is type of lease. controlled by one or insured depository institutions.under additional restriction known as loan covenants. Acting as a provider of loans is one of the principal tasks for financial institutions.2. issuing of debt contract such as bonds is a typical source of funding. Financial subsidiaries are bank subsidiaries that are not operating subsidiaries (that is.  The lessee has the option to acquire ownership of the asset (e.6 Investment in Subsidiary A financial subsidiary is a corporation. along with loans.2.  The lessor will recover a large part or all of the cost of asset plus earn interest from the rentals paid by the lessee. software). or similar entity.  The lessee will pay a series of rentals or installments for the use of that asset. or bargain option purchase price). The finance company is legal owner of the asset during duration of the lease. 2.2. This is in contrast to securities that are purchased by a broker-dealer or other intermediary for resale. vehicle.

meaning a future tax liability or asset. The income statement reflects the investor‟s share of the results of the operations of the investee. resulting from temporary differences or timing difference between the accounting value of assets and liabilities and their value for tax purposes. For a bank to own an interest in a financial subsidiary the bank and the subsidiary must meet certain requirements and comply with specified safeguards.2. Where a deferred tax liability or asset is recognized. Subsidiary is an enterprise that is controlled by another enterprise (known as the parent) 2. 2. Equity method is a method of accounting whereby the investment is initially recorded at the cost and adjusted thereafter for the post-acquisition change in the investor‟s share of net assets of the investee.2. Control (for the purpose of this standard) is the power to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities.2. 2. The term was originally used in accounting to express the intangible but 15 . Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control over those policies. Modern accounting standards typically require that a company provides for deferred tax in accordance with either the temporary difference or timing difference approach.9 Goodwill of the Bank Goodwill in financial matters is the value of an entity over and above the value of its assets. the liability or asset should reduce over time (subject to new difference arising) as the temporary or timing difference reverses. Cost method is a method of accounting whereby the investment is recorded at cost.8 Deferred Taxation Deferred tax is an accounting concept (also known as future income taxes). The income statement reflects income from the investment only to the extent that the investor receives distributions from accumulated net profits of the investee arising subsequent to the date of acquisition.7 Investment in Associates Associate is an enterprise in which the investor has significant influence and which is neither a subsidiary nor a joint venture of the investor.to national banks) or subsidiaries that national banks otherwise are specifically authorized by the express terms of a federal statute.

but the company‟s overall value (including brand. The market value of an asset is its dollar value on the open market. This may be determined by comparing the property with similar. Anybody buying that company would book $ 10 million in total assets acquired. and $ 9 million in goodwill. so goodwill will always be apparent. goodwill in a professional practice entity may be attributed to the practice of itself and to the professional practitioner. recently sold property as they do in a professional appraisal. is subject to a constant process of market valuation. Assets have both a market value and cash value. goodwill and intangible assets are usually listed as separate items on a company‟s balance sheet. It should be noted that while goodwill is technically an intangible asset. There is a distinction between two types of goodwill depending on the type of business enterprise: institutional and professional practice goodwill.10 Other Asset of the Bank An asset is a cash or non cash item that can be converted to cash.quantifiable “prudent value” of an ongoing business beyond its assets. customers. 2. 16 . goodwill serves as the balancing sum that allows one firm to provide accounting information regarding its purchase of another firm for a price substantially different from its book value. by contrast. Furthermore. a software company may have net assets (consisting primarily of miscellaneous equipment and assuming no debt) valued at $ 1 million. In this sense.2. The acquiring company must recognize goodwill as an asset in its financial statements and present it as a separate line item on the balance sheet. For example. arising where the net asset at the date of acquisition. according to the current purchase accounting method. fairly valued exceed the cost of acquisition. and a property‟s market value is the amount it would for on the open market. A publicly traded company. In a private company. Goodwill can be negative. Negative goodwill is recognized as a gain to the extent that it exceeds allocations to certain assets. comprising $ 1 million physical assets. goodwill has no predetermined value prior to the acquisition. intellectuals capital) is valued at $ 10 million. it is no longer recognized as an extraordinary item. For example a stock‟s market value is the price quoted on stock exchange on particular day. Under current accounting standards. It arises when a company is purchased for more then the fair value of the identifiable assets of the assets is by definition the value of the “goodwill” of the purchased company. its magnitude depends on the two other variables by definition. resulting perhaps from the reputation the firm enjoyed with its client.

In addition. fixed assets normally include items such as land and buildings. banking firm‟s current assets would be its inventory (in this case. office equipment. furniture. motor vehicles used to transport deliveries.2. including important duties and other deductable trade discounts and rebates. computers. 17 . debtors or accounts receivable).). motor vehicles.e. etc. These often receive favorable tax treatment (depreciation allowance) over short-term assets. According to International Accounting Standard (IAS) 16. cash registers used to handle cash payments. Fixed Assets are assets which future economic benefit to flow into the entity. etc. fixtures & fittings. These are items of value which the organization has bought and will use for an extended period of time. As an example.11 Properties and Equipments Property and equipment can be easily converted to cash. each aforementioned non-current asset is not sold directly to customers. Moreover. cost attributable to bringing and installing the asset in its needed location and the estimate of dismantling and removing the item if they are eventually no longer needed on the location. It is pertinent to note the cost of a fixed asset is its purchase price. etc. and plant & machinery. yeast. In most case only tangible asset are referred to as fixed. This can be compared to current asset such as cash or bank accounts. flour. cash held in banks.2. a fixed/ non-current asset can also be defined as an asset not directly sold to a firm‟s consumer/end-user. the value of sale owed by the firm via credit (i. its non-current asset would be the oven used to bake bread. whose cost can be measured reliably. which are described as liquid assets.

164 784.304 3.0 DATA ANALYSIS Table 1: Total assets for the five respective years Traditional Banking Years 315.197 2.310.878 446.159 4.086 669.CHAPTER THREE 3.7467 1 (-5192403) 4008721 -1.698.084.366 1 (7002151) 4008721 1.721 X 0 1 2 3 4 U=X–A C 990022 -2 895463 -1 1084086 0 669964 1 369159 2 4008721 F C ∑ FU ∑F = FU -1980044 -895463 0 669964 738318 -1467225 FU2 3960088 895463 0 669964 1476636 7002151 FU3 -7920176 -895463 0 669964 2953272 -5192403 FU4 15840352 895463 0 669964 5906544 23312323 M11 = 1 (-1467225) 4008721 -0.964 369.417 Total 990.114 171.064 622.850 197.008.208 223.958 273.1 Test for Normality E-Banking Years 674.2953 = M21 = C ∑ FU2 ∑F = = M31 = C ∑ FU3 ∑F = = 18 .299 299.022 895.463 1.962 1.

3.366)4 = 5.8154 – 1.83 and 3.M41 = C ∑ FU4 = ∑F = 1 (23312323) 4008721 5.366)2(1.6127)2 = 2. This result could equally be obtained using the Pearson chi-square method. Formulate the null hypothesis Compute the expected frequencies of the cells 19 .2692  4 = M4 M22 4= 5.2953) + 6(-0.366)2 = 1. the chi-square test is used to measure the discrepancies that exist between observed frequencies and expected frequencies using a contingency table.7467) – 3(-0. The observed frequencies occupy the rows and columns.(M11)2 = 1. we resort to the non-parametric test to achieve our aims.2 Test for Independence The chi-square test will be adopted to perform this test.8154 M2 = M21 . Hence. 2. we conclude that the data are not normally distributed.  4 = 2.8963 + 1.3(M11)4 = 5.026 The lower and upper class limits in the table for departure from normality are 2. 3. The contingency table is a two-way classification table arranged in rows and columns.4039 – 0. Since our data does not follow the normal distribution.0538 = 5.366)(-1. A detailed procedure of the chi-square test is as follows: 1.8154 – 4(-0. According to Spiegel (1972).7467 – (-0.18. The total observed frequencies in each row or column are called marginal frequencies.2692 (1.4M11 M31 + 6(M11)2 (M21 ) .026 does not lie within the limit.6127 M4 = M41 .

H1 : performance is not dependent on the years. Decision rule: reject Ho if χ2 > χ2(α)df and accept if otherwise. Conclude appropriately. 2 Compute the test statistic χ = ∑∑ (oij – eij)2 1 1 eij Where r c oij = observed frequency eij = expected frequency 4. 20 . Test of dependency of the banking performance over the years using the chi-square test. Hypothesis: H0 : performance is dependent on the years. 6.Expected frequency Cij = Ri * CJ N N =∑Ri = ∑Cj = 1 1 r c ∑∑ = Oij 1 1 r c Where Ri = ith row‟s marginal frequencies Cj = jth column‟s marginal frequencies N = total number of observation 4. Decide the α-level of significance and read from table Where df = (r-1)(c-1) χ2(α)df 5.

347.208 223.064 622.114 171.4503 21 .698.022 895.p Table 4 : Expected Frequencies Traditional Banking years 323601.694.6818 120.9883 218.164 784.420.964 369.299 299. .417 Total 990.601.738.159 4.4503 Table of expected frequencies are shown below to 2d.962 1.494.986.9136 e 21 = 895463 * 1310304 4008721 .878 446.Table 3 Traditional Banking Years 315. = 292.0415 354.084.0864 602768.9585 729.310.0415 e 42 = 669964 * 2698417 4008721 = 450.008.086 669.958 273.850 197.5497 E-Banking years 666.494.0117 450977.3184 e 52 = 369159 * 2698417 4008721 = 248.977.721 e11 = 990022 * 1310304 4008721 = 323. .197 2.463 1.3184 248.664.694.304 E-Banking Years 674.9136 292.

4503 χ 2 = 180.05)4 = 9.3834 χ2 = 88645. and the differences di = xi − yi between the ranks of each observation on the two variables are calculated.1906 + 8580. The Spearman correlation coefficient is often thought of as being the Pearson correlation coefficient between the ranked variables.0059 + 49516. a simpler procedure is normally used to calculate ρ. a perfect Spearman correlation of +1 or −1 occurs when each of the variables is a perfect monotone function of the other.4503)2 450977.χ 2 5 2 = ∑∑ (oij – eij)2 i j eij χ 2 = (315958 – 323601. In practice.49. Conclusion: Since χ 2 = 88645. the performance depends on the years and even at 1% level of significance.6759 < χ 2(0.49 = χ2(0.99)4 = 0. 3.5595 + 1285.4458 + 24044.3184 248494. is a nonparametric measure of statistical dependence between two variables.3 Test for Correlation In statistics.0415)2 + (299208 – 354347.58 + 87. we conclude that at 5% level of significance. 22 . yi. It assesses how well the relationship between two variables can be described using a monotonic function. If there are no repeated data values.6759 χ 2(α)df = χ 2(0.3184)2 + (171197 – 248494. Yi are converted to ranks xi.6766 + 624. named after Charles Spearman and often denoted by the Greek letter ρ (rho) or as rs.0415 354347.9136 292694.9833)2 + 323601.05)4 = 9.3162 + 108. however. The n raw scores Xi.9833 …+ (446114 – 450977.4519 + 52.066 + 4166. Spearman's rank correlation coefficient or Spearman's rho.297 Decision rule: Reject Ho if χ 2 > χ 2(α)df and accept if otherwise.9136)2 + (273299 – 292694.

6∑di2 n(n2-1) Rs = 1 – 6 *2 5(25-1) Rs = 0.Ry)2 2 4 4 1 3 4 3 1 4 4 2 4 5 5 0 ∑di2 = 2 Test statistics rs = 1 .If there are no tied ranks. then ρ is given by ρ = 1 .05. It is an average of their positions in the ascending order of the values.9 23 .6∑di2 n(n2-1) One has to assign the same rank to each of the equal values. ρ = 0.9 From the table. Test to show if the performance correlate Table 5 Traditional Banking (x) Ranks(x) E-Banking (y) Rank(y) 315958 5 674064 4 273299 3 622164 3 299850 4 784878 5 223850 2 446114 2 197962 1 171197 1 Hypothesis: H0 : x and y are correlated (ρ = 0) H1 : x and y are not correlated (ρ > 0) Rx Ry di2 di2 = (Rx . n = 5 and α = 0.

the others are no longer informative. to assess which Xj may have no relationship with y at all. Conversely.4. Less commonly.) Given a variable y and a number of variables X1. which is the domain of multivariate analysis. thus once one of them is known.. 3.” Most commonly. In statistics. Linear regression models are often fitted using the least squares approach. the least squares approach can be used to fit models that are not linear models. the fitted model can be used to make a prediction of the value of y. rather than on the joint probability distribution of y and X. linear regression can be used to fit a predictive model to an observed data set of y and X values. Thus. Linear regression was the first type of regression analysis to be studied rigorously. or forecasting. or some other quartile of the conditional distribution of y given X is expressed as a linear function of X. . 24 . or by minimizing a penalized version of the least squares loss function as in ridge regression..9. Xp that may be related to y. In linear regression. but they may also be fitted in other ways. and to identify which subsets of the Xj contain redundant information about y. then linear regression analysis can be applied to quantify the strength of the relationship between y and the Xj. linear regression focuses on the conditional probability distribution of y given X. and to be used extensively in practical applications. linear regression refers to a model in which the conditional mean of y given the value of X is an affine function of X. linear regression is an approach to modeling the relationship between a scalar variable y and one or more variables denoted X. they are not synonymous. Such models are called “linear models. Most applications of linear regression fall into one of the following two broad categories: 1.) If the goal is prediction. such as by minimizing the “lack of fit” in some other norm.4 3.Conclusion: since Rs = 0. 2. Linear regression has many practical uses. linear regression could refer to a model in which the median.2 < ρ = 0.. while the terms “least squares” and linear model are closely linked.1 Regression study Linear Regression with one independent variable. if an additional value of X is then given without its accompanying value of y. After developing such a model. This is because models which depend linearly on their unknown parameters are easier to fit than models which are non-linearly related to their parameters and because the statistical properties of the resulting estimators are easier to determine. models of the unknown parameters are estimated from the data using linear functions. Like all forms of regression analysis. we conclude that there‟s a high correlation between the banking techniques.

5 2.25 XY -3033288 -2177574 -1962195 -669171 -85598. Y = ΣYi N N X = 4. Trend lines are sometimes used in business analytics to show changes in data over time.208 223.25 6.5 -1. experimental design.5 157979 409948. although some variations use higher degree polynomials depending on the degree of curvature desired in the line.114 171. A trend line could simply be drawn by eye through a set of data points.5 -3.3. It tells whether a particular data set (say GDP. and does not require a control group.25 0.962 X -4.6 477352.2 5 12.850 197.5 and Y = 400872.8 494218.36 382202.5 0.25 12.76 568895.28 531556. Trend lines are often used to argue that a particular action or event (such as training. it suffers from a lack of scientific validity in cases where other potential changes can affect the data.y=Y– Y X = ΣXi .08 351976.25 6.25 2.88 344864.76 -370933.5 3. Trend lines typically are straight lines.164 784. oil prices or stock prices) have increased or decreased over the period of time.878 446.8 -195010.064 622. but more properly their position and slope is calculated using statistical techniques like linear regression.4.25 2.32 -183580.4.64 -211005.197 315.92 270187.5 -2. This has the advantage of being simple.25 20.32 456879.5 X2 20. or a sophisticated analysis technique.12 101249.84 -103583.2 Trend line A trend line represents a trend. However.25 0.299 299.24 Error(ei) 441215.5 -0.958 273.4 307525. This is a simple technique.1 25 .5 4.28 -307706.24 Developing regression equation x =X– X.3 Table 6 X 0 1 2 3 4 5 6 7 8 9 Y 674. 3. or an advertising campaign) caused observed changes at a point in time.5 748020 783475 8908829 Yest 232848.84 419541.5 1. the long-term movement in time series data after other components have been accounted for.

9068 26 .9672 643545.9730 718222. 606206.4219 755560.5 Yest = 37338.4521 680883.1 82.y = (ΣXY)X ( Σ X2 ) Yest = 3080425(X – 4.03 Yest = 0.4849X + 232848.9182 Σei = -0.5) + 400872.4122X + 66.8751 Trend Line Graph 600000 500000 Estimated Total Assets 400000 300000 200000 100000 0 1 2 3 4 5 6 7 8 9 10 The estimates for subsequent years applying the trend line equation developed is given below Years 2011 2012 2013 2014 2015 Estimated Total Assets.

As long as it meets your banking preferences. including the various security features and key ingredients of internet banking which includes confidentiality. integrity. you should always take into consideration every single preference you have in order to choose what is really appropriate for you. there should be restrictions and objective enforcement of necessary electronic banking laws and policies in line with international standards.CHAPTER FOUR SUMMARY. With the modern day trend of e-banking practice. 1. Banks should put in place procedures for maintaining and updating their websites. 2. In addition to regulating cyber activities in Nigeria. availability and effective communication. Hence. especially since most applications in use. The rising cases of internet related frauds in Nigeria have made the internet banking environment in Nigeria very complex. The study revealed that the total amount (profit) made by the bank was dependent on the years the techniques were used. The Nigerian government should help in reducing the cost of interconnectivity and general Information and Communication Technology (ICT) access. 27 . The developments of banks websites should go beyond information purposes. the Central Bank of Nigeria would have to ensure that the cost is not a hindrance in the needed systems integration among the emerging banks. CONCLUSION and RECOMMENDATIONS The study focuses on the comparison of traditional banking and e-banking techniques using statistical models. 4. When choosing a particular banking method. every option you have will certainly depend on what you really like. Acquiring software that would be capable of handling the emerging divergence in the banking system is also a challenging issue as banks are already complaining of the huge cost of integration. This will ensure public access to cheap and fast telecommunication services. The positive trend line developed depicts the fact that there‟s increase in the bank returns during the e-banking years coming from the traditional banking. lacked the capacity and scope to match the new trend in the industry. below are recommendations to upgrade it. prior to consolidation. 3.

This will instill more confidence in the customers and hence guarantee their patronage of internet banking services.5. 28 . The Nigerian government. in collaboration with the banks. should educate and inform her citizens and customers on the workability and effectiveness of internet banking.

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