A bank’s profitability is of utmost concern in the modern economy, commercial banks are in the business of receiving deposits (liabilities) and to issue debt securities on one hand and create or invest in assets on the other hand during these transactions banks incur costs for their liabilities and earn income from their assets. Asset – liability management is therefore very critical for the sound management of the finances of any organisation that invests to meet its future cash flow needs and capital requirements.
An efficient asset-liability management requires maximising the bank’s profits as well as controlling and lowering various risks. The ultimate goal is to identify the best possible strategy to manage the composition of financial institution’s assets and liability by controlling the various types of business strategies to maximise profitability. Thus profitability of banks is directly affected by management of their assets and liabilities.
BACKGROUND TO THE STUDY
The instability of the financial sector and the fact that it keeps upgrading to keep up with the demand for better products and services by clients puts operators in the industry under considerable pressure to improve upon their profit margins by finding effective strategies for managing their asset and liability portfolios. An efficient asset –liability management deals with the optimal investment of assets in view of meeting current goals of future liabilities, maximising firms profit as well as controlling and lowering various risks.
The rewards from such improvements in the asset liability management techniques will spread across firm, industry and economic levels. At the national level for example the financial services sector is of central importance to the overall Zimbabwean economy as it influences, directs and engineer growth. Thesector provides market, liquidity, reduces transaction costs, provide investment opportunities and ensure competition in economic
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