Abstract:

This study investigated how off balance sheet engagements of deposit money banks affect risk and profitability compositions of such banks. The study employed secondary data obtained from financial statements of five deposit money banks (namely, Access, Zenith, UBA, GTB and First Bank) for eleven years period (2004 to 2014). The descriptive and content analysis of the financial statements of the selected banks investigated revealed that Zenith Bank has the highest amount of off balance sheet engagement. It therefore concludes that inspite of the huge profit that may accrue to the deposit money bank for engaging in off balance sheet activities, it may be exposed to a very high risk in the event of market shocks. In view of this, the study recommends a prudent management and monitoring of off balance sheet activities by management, the board and Central Bank of Nigeria. This is necessary to ensure that banks remain within the approved threshold or limits of off balance engagements inorder not to compromise the confidence reposed on the banks by depositors and investors.