Abstract: Managing a bank's portfolio effectively, maximizing returns and minimizing risks all at once, while being constrained by management and regulatory requirements, is no easy feat. While concentrating on the removal of current risk classes, this article addresses relevant topics in the banking industry's portfolio diversification. Focusing on commercial banks in Kenya, this study evaluates the theoretical and empirical foundations of portfolio diversification as a strategy for banks operating in a nation like Kenya. This research set out to address the limitations that Kenyan banks face by building a multi-objective strategy for achieving an optimum balance sheet, using the present situation as a starting point. The purpose of the research was to find out how different types of deposit portfolios affected the bottom lines of Kenyan commercial banks. Research methods that were used in the study were descriptive and correlational. The study's intended participants were the 43 commercial banks that have obtained formal licenses from the Central Bank of Kenya by the end of 2018. Data for the study came from a variety of sources, including the Kenya National Bureau of Statistics, the World Bank, the Central Bank of Kenya, the published financial accounts statements of all 43 commercial banks in Kenya, and the Banking survey publications. The data was analyzed using time series and cross-sectional unbalanced secondary panel methods. The study covered the years 2003–2018. Existing pair-wise correlations between the studied variables were examined in the study. Financial performance was positively impacted by the diversification of deposits. According to the research, portfolio management should have safeguards in place to reduce risk. Commercial banks should prioritize building trust, creating diverse marketing tactics, and determining the optimal asset combination for efficient portfolio diversification.
Keywords: Deposits Portfolio, Financial Performance, Commercial Banks, Banks’ Portfolio Diversification.
Title: Effect of Deposits Portfolio on the Financial Performance of Commercial Banks in Kenya
Author: Dr. Stephen Githaiga Ngware, Dr. Kevin Ogonji Muluka
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
Vol. 11, Issue 2, October 2023 - March 2024
Page No: 385-396
Research Publish Journals
Website: www.researchpublish.com
Published Date: 19-March-2024
