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Cover page                                                                                                 i

Title page                                                                                                    ii

Declaration page                                                                                         iii

Dedication                                                                                                  iv

Acknowledgements                                                                                     v

List of tables                                                                                               vi

List of figures                                                                                             vii

Abstract                                                                                                      viii


1.1Background to the Study                                                                    1

1.2 Statement of Problem                                                                         4

1.3 Objectives of the Study                                                                      5

1.4 Research Question                                                                                       6

1.5 Research Hypotheses                                                                         6

1.6 Significance of Study                                                                         7

1.7 Scope of Study                                                                                   7

1.8 Definition of Terms                                                                                     7


2.1 Introduction                                                                                                 9

2.2 Conceptual Review                                                                                      9

2.3 Empirical Review                                                                               11

2.4 Theoretical Framework                                                                      21


3.1 Introduction                                                                                        25

3.2 Research Design                                                                                 25

3.3 Nature and Sources of Data                                                               25

3.4 Model Specification                                                                                     25

3.5 Techniques of Data Analysis                                                             28


4.1 Data Presentation                                                                               29

4.2 Data Analysis                                                                                     32



5.1 Summary of findings                                                                          40

5.2 Conclusion                                                                                         40

5.3 Recommendation                                                                               41





Table No.                      Table Name                                                 Page No.

4.1.1                              Necessary Data for Analysis                               29

4.2.1                              Model Summary                                                 32

4.2.2                              ANOVA                                                               33

4.2.3                              Coefficients                                                                   33

4.2.4                              Model Summary                                                 35

4.2.5                              ANOVA                                                               35

4.2.6                              Coefficients                                                                   36

4.2.7                              Model Summary                                                 37

4.2.8                              ANOVA                                                               37

4.2.9                              Coefficients                                                                   37




Figure No.                     Figure Name                                                  Page No.

2.4.1                              Rogers’ Diffusion Theory                                  22









This study investigated the Returns on Equity and Returns on Asset of Guaranty Trust Bank following the adoption of E-banking in Nigeria: a study of Guaranty Trust BankPlc 2014-2017. The main objective of the study is to examine the effect of e-banking on profitability of commercial banks in Nigeria using Guaranty Trust Bank (GTBank) plc as a study. One specific objective is to examine to which extent e-banking influences ROA. Three hypotheses were formulated, three research questions. The research design used was ex post-fact. The data was sourced from the annual report of Guaranty Trust Bank plc. Regression analysis was used to analyze the data. The analysis was carried out using Statistical Package for Social Sciences (SPSS). One of the findings of this work is that e-banking has no significant impact on Return on Asset. In conclusion, this study has provided e-banking has not improved Returns on the Equity and Return on Assets of GT Bank. I recommend that the banking industry should adjust to full and effective deployment of Information Technology (IT) due to its sophistication since the technology is irreversible with relative perceived advantage.












  • Background to the Study

Internet is a fast spreading service which allows customers to access account-specific information and possibly conduct transactions from a remote location- such as at home or from the work place. ATM cards, debit cards, credit cards etc. have eased up human life to a point that life today would have been hard and stressful.

The increased acceptance and penetration of internet have redefined the ground for retail banks. The retail banks are now offering their services mostly through their internet branches. However, the effect of internet banking on bank profitability has remained an understudied issue.

Daniel, (1999) cited in Al-hajri, (2008) describes internet as the provision of banking services to customers through internet technology. According to Basel Committee on banking, (2008), internet banking is defined as to include the provision of retail and small value banking products and services through electronic channels as well as a large value electronic payment and other wholesale banking services delivered electronically. Though Al-samadi and Al-wabel, (2011) expressed that the definition of internet banking varies among researchers partially because internet banking refers to several types ofservices through which bank customers can request information and carry out banking services.

However, the change in the banking industry in Nigeria started with the advent of electronic devices to assist in carrying out quality services to the customers. The introduction of these electronic devices, has increased competition in the industry, and has gone a long way to reduce customers’ waiting time for banking transactions. This invention is brought in by the use of computers and other networks. In Nigeria, the networking started with the LAN (Local Area Network), MAN (Metropolitan Area Network) and later, WAN (Wide Area Network).

Generally, the automation of banks makes transactions and data processing very easily reached for quick management decision making. This led to another level of benefit which brought in what is today referred to as internet. Internet Banking helps the banks to speed up their retail and wholesale banking services. The banking industry believes that by making use of the new technology, banks would improve customer service level and tie their customers closer to the Yang and Whitefield, (2005). Simpson, (2002) asserted that what actually motivates the investment in internet banking is largely the prospects of minimizing operating costs and maximizing operating revenue.

Nevertheless, the adoption of Internet Banking has brought challenges to the industry in terms of risk exposure. The volume of deposits has increased as well as fraudulent practices experienced by Nigerian banks since its adoption in the economy. This is why Ovia, (2001) posits that Nigeria’s banking scene has witnessed remarkable changes, especially in the mid-80s and these have been seen in the large volume and complexity in product or service delivery, financial freedom and business process re-engineering. The effectiveness of using Information Technology in banks therefore cannot be put to doubt. The fact remains that the idea of using IT in banks is necessitated by the huge amount of information being handled by banks on a daily basis. On the side of the customer, cash is withdrawn or deposited; cheques are deposited or cleared, statement of accounts are provided, money transfers and so on. At the same time, banks need up-to-date information on accounts, credit facilities and recovery, interest, deposits, charge, income, profitability, indices and other control of financial information.

However, researchers have not given much attention to this change caused by internet banking with regard to profitability performance of banks. The changes in industry in Nigeria occasioned by the idea of internet banking has forced Nigerian banks to invest more on assets to meet up with competitive positioning. Since many earnings have been retained to meet up this obligation, shareholders have been denied dividend with the anticipation of fatter future dividend.

The banking software which is usually improved on a short term basis causes huge financial costs to the banks. To the capital providers, they expect extremely large returns from the project if the internet is adopted. Annual financial reports of Nigerian banks in recent years have shown that dividend returns are dwindling while other performance indicators seem to be weak contrary to the expectation of the shareholders or investors.

Generally, there appears not to be improvement on banks’ return on equity and assets as speculated.

1.2 Statement of Problem

A great majority of the recent works on electronic money and banking suffers from a narrow focus. It usually ignores internet banking in every way and equates electronic money with the substitution of currency. For instance, Freedman, (2000) put forward that e-banking and electronic money consists of three devices; access devices, stored value card, and network money. Internet banking is simply the use of new access device and is therefore ignored.

Electronic money is the sum of stored value (smart) cards and network money (value stored on computer hard drives). Within this constricted room for internet banking and electronic money, there are however many research that addresses one or more of the challenges facing it. Santomero and Seater, (1996), Prinz, (1999) and Shy and Tarkka, (2002) and many others have produced models, that ascertain conditions under which different electronic payments substitute for money. Most of these models show that there is at least the possibility for electronic substitutes for currency to emerge and succeed on a large scale, depending on the features of the various technologies as well as the trait of the potential users.

Friedman, (1999) point out that internet banking presents the chance that a totally different payment system, not under the control of the Central Bank may arise. King, (1999) argues, that today computers make it at least possible to avoid the payment system altogether, instead using direct bilateral clearing and settlement.

  • Objectives of the Study

The main objective of this study is to examine the effect of internet banking on profitability of commercial banks in Nigeria, using Guaranty Trust Bank (GTB) plc. as a case study. The specific objectives of the study are:

  1. To examine to which extent internet banking influences bank ROA.
  2. To examine the magnitude to which internet banking influences ROE.
  • To determine if ATM transactions has any significant impact on ROE.


  • Research Questions

In order to achieve the stated objectives for the study, the following questions are to be asked:

  1. To what extent does internet banking affect ROA in Guaranty Trust Bank?
  2. To what extent does internet banking affect ROE in Guaranty Trust Bank?
  • To what extent does an ATM transaction affect ROE?
    • Research Hypotheses
  1. H0: Internet Banking has no significant impact on Return on Asset of Guaranty Trust Bank.

H1: Internet Banking has a significant impact on Return on Asset of Guaranty Trust Bank.

  1. H0: Internet Banking has no significant effect on Return on Equity of Guaranty Trust Bank.

H1: Internet Banking has a significant effect on Return on Equity of Guaranty Trust Bank.

  • H0: ATM transactions have no significant effect on Return on Equity of Guaranty Trust Bank.

H1: ATM transactions have a significant effect on Return on Equity of Guaranty Trust Bank.


1.6Significance of Study

The study will aid commercial banks tin Nigeria to understand banking in a new dimension. Exposure from the study will highlight the different benefits of cashless banking and how these measures, if properly taken can reduce operation costs and increase profitability. Besides interest from loans and other investments commercial banks participate in, this study will also introduce a model for banks to adopt the customer convenience model. This model as shown in this study will inform managers of commercial banks on how to serve customers better while gaining their loyalty and money.

1.7Scope of Study

The study will cover internet banking investments (POS channels, ATM channels) and profit after tax of Guaranty Trust Bank plc. from 2014-2017. The study could not cover other banks due to inadequate disclosure on internet banking investments from these banks and time factor (limited time).

1.8Definition of Terms

Internet banking: is an electronic payment system that enables customers of a financial institution to conduct financial transactions on a website operated by the institution, such as a retail bank, virtual bank, credit union or building society. Online banking is also referred to as; internet banking, e-banking, virtual banking, online banking.

CBN: Central Bank of Nigeria.

Profitability: the state or condition of yielding a financial gain. It is often measured by price to earnings ratio.

Return on Asset (ROA): this shows the percentage of how profitability a company’s assets are generating revenue.

Return on Equity (ROE): measures the rate of return for ownership interest (shareholders’ equity) of common stock owners. It measures the efficiency of a firm at generating profits from each unit of shareholder equity, also known as net assets or assets minus liabilities. ROE shows how well a company uses investments to generate earnings growth. ROEs 15-20% are generally considered good.


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