Impact of Portfolio Diversification Strategies on the Performance of Deposit Money Banks in Nigeria

The study examines the effects of portfolio diversification on the performance of Nigerian deposit money banks (DMBs). One of the specific objectives of the study was to investigate sectoral credit diversification, income stream diversification, deposit diversification, and investment diversification as proxies for portfolio diversification and the financial performance of Nigeria's deposit money banks (DMBs) using return on equity. For a period of twenty two years (22), from 2001 to 2022, data was obtained from the yearly financial statements of some selected Nigerian deposit money organizations. An ex-post facto research design was employed in the study. With the aid of E-views 10, panel least squares regression is used to evaluate secondary source data taken from these banks to examine the formulated hypothesis. The results of the study's data analysis revealed that sectoral credit diversification and deposit diversification significantly improved the financial performance of deposit money banks in Nigeria, whereas income stream diversification and investment diversification have the opposite effect. The study comes to the conclusion that the two positive variables, SCD and DPD, are good indicators of deposit money institutions' financial performance. According to the report, portfolio diversifications at banks should be carefully designed in order to protect the interests of equity holders, other stakeholders, and the institutions' financial needs. Therefore, it should be possible to provide a stable economic and political environment to improve the financial performance of listed organizations, especially banks.