IMPACT OF CAPITAL ADEQUACY ON FINANCIAL PERFORMANCE

ABSTRACT This study investigates the relevance of capital adequacy to the performance of banks in Nigeria, with a focus on Guarantee Trust Bank (GTB) Plc. The study aims to determine the impact of capital adequacy on customer confidence and overall bank performance. A survey research design was adopted, with 300 respondents comprising bank staff and corporate customers. Primary data were collected using questionnaires and interviews, while secondary data were sourced from journals, textbooks, and bank records. Data were analyzed using descriptive statistics, chi-square tests, and regression analysis to test hypotheses and examine relationships between variables. The findings reveal that GTB has maintained adequate capital over the years, exceeding industry standards, which positively affects customer confidence and service delivery. Chi-square results indicate that capital adequacy significantly influences customer confidence, while regression analysis shows a positive relationship between capital adequacy and bank performance, measured by deposit-to-asset ratios. The study concludes that capital adequacy is essential for bank stability, profitability, and depositor trust, and recommends that banks maintain regulatory capital levels, invest in technology, preserve internal reserves, enhance profitability, and improve shareholder value. These insights are valuable for bank management, regulators, and policymakers in strengthening financial stability and promoting investor confidence.