SECRET RESERVES.

Dominion, Volume 3, Issue 810, 6 May 1910, Page 4

SECRET RESERVES.

The statement of the Financial Times, published as a cable message the other clay, to tho effect that "some of the Australian banks'in recent years have hidden considerable secret reserves, and there will be a strong demand by shareholders for increased distribution" is interesting. The existence of secret bank reserves has been known, but no one except the highest officials of the institutions concerned know the extent of such reserves. It may be stated that the demand for increased dividends has already been made, for at the half-yearly meeting of shareholders of the Bank of Australasia Sir Owen Roberts threw out a suggestion that increased dividends should be paid. A correspondent signing himsolf "Gum Tree,", writing to the Financial Tvne.s of March 22, says in support of larger dividends: "A few facts may encourage the general body of shareholders to protest against continuation of the absurd conservatism of the past few years. With regard to< premises account, the Bank [of Australasia] possesses the finest sites in every city of Australia and New Zealand, as well as in all their suburbs and all important country towns and innumerable small places. These, covered with j quite palatial buildings in all tho large centres, must have cost over a million. The head office in Sydney alone is marketable to-day at more than the whole Premises Account now stands at. There seems to be a desiro to extinguish altogether the promises debit. I have no objection; but why this haste?" The same correspondent states that the Bank Reserve Fund exceeds its capital and to this reserve might be added an "undisclosed reserve" amounting to several hundreds of thousands. He proceeds to arguo that in the circumstances the profits warrant higher dividends neing paid. The possession of a secret reserve ia very necessary for a bank. In the great banking "collapse of 189194, the secret reserves, if they existed, wore not large enough to save many of the weaker institutions. The big banks, like .the Bank of Australasia, Union, and New South Wales, easily survived tho panic because of their strength, and also, no doubt, because of their hidden resources. To a certain extent it is desirable to have large hiddenreserves, but there is always the tendency to overdo the thing. Writing-off the Premises' Account may or may not be the right course to pursue, at all events the institutions in Australasia can point to the Bank of England as an example in this respect. The premises of the Bank of England do not figure in the weekly return, and yet thewhole of the property at head office and thirteen branches is freehold. This constitutes the visible "secret" reserve of tho Bank of England. The ordinary disclosed reserve which is given in the return as "rest" amounts to a little more than £3,000,000, and is never allowed to go below this sum. If. the banks in the Commonwealth and Now Zealand continue to enjoy prosperous times the larger dividends sought for may be forthcoming, but tho caution shown will, wo have no doubt, commend itself to the great bulk of the customers of the banks.