EFFECT OF CREDIT RISK MANAGEMENT PRACTICES ON PROFITABILITY OF COMMERCIAL BANKS IN BAUCHI.

ABSTRACT This study examines the effects of credit risk management practices on the profitability of commercial banks in Bauchi State, Nigeria, with a focus on First Bank of Nigeria, United Bank for Africa (UBA), and Stanbic IBTC Bank. The research was motivated by the persistent challenges of non-performing loans (NPLs) and their implications for the financial stability and performance of banks. Data were collected through structured questionnaires administered to bank staff and analyzed using descriptive and inferential statistical methods. The findings reveal that poor credit risk management practices significantly contribute to high levels of NPLs within the selected banks. However, despite these challenges, profitability levels remain relatively high, partly due to the transfer of loan losses to other customers through higher interest margins. The study further established that capital adequacy, operational efficiency, and regulatory compliance play critical roles in sustaining profitability. Based on these findings, the study recommends that commercial banks should strengthen their credit evaluation and monitoring processes, improve capital adequacy buffers, invest in staff training on modern risk management techniques, and comply strictly with Central Bank of Nigeria regulations. These measures will enhance financial stability, reduce loan default rates, and promote sustainable profitability in the Nigerian banking sector.