The Feilding Star. SATURDAY, MAY 22, 1886. Finance

Feilding Star, Volume VII, Issue 147, 22 May 1886, Page 2

The Feilding Star. SATURDAY, MAY 22, 1886. Finance

It appears somewhat remarkable that during a period of great financial depression, the banking institutions doing business in the colony should be able to declare suck handsome dividends, while others should find it '. difficult or impcßsible almost to meet

current expenses. We will endeavor to show how this happens in as simple and intelligible form as our limited ( space will allow. The amount of paid up capital of the banks on the quarter, i ending March 31, 1886., was £5,700,- J 000, and the half yearly dividends last declared, £422,750. The lowest per centage was seven, and the highest 17£ per annum. Instead of these profits being excessive, they are small when the amount of money employed is considered. Apart from the capital represented by tho shares, the public supplied in note and bill circulation, Government deposits, and deposits not bearing: interest £5,184,323, and in deposits bearing interest £6,457,344. The average rate of interest on the latter does not exceed 4 per cent, per annum. The money actually employed in bills discounted, overdrafts, and other advances, amounts to £16,325,137. At ten per cent., this may be safely estimated to give £1.632,513 gross earning, from which has to be deducted two half yearly dividends £422,750 each— £B4s,soo, leaving £787,013 for working expenses, bad debts, and '' balances carried to credit of profit and loss account." These figures suggest that the public not only supplies two-thirds of the working capital, but pays for using it when it returns to them in what is erronously called "accommodation." We have purposely left out the unemployed capital invested in coin, bullion, notes of other banks, landed property, &c, amounting to £2,732,557, in order to point out that the shareholders only contribute £3,019,443 to the 16 millions actually employed in the business of the several banks. It will thus be clearly seen that the dividends declared are utterly disproportionate to the total sharecapital employed. Much has been said of the want of liberality shown by the banks in calling in current overdrafts, putting restrictions on discounts, and otherwise crippling fcrade, but the persons who have said this are ignorant of the patent fact of the banks having overtraded as well as private firms. The above figures ought to prove conclusively that they have gone further than prudent already, and they really have no more money at their disposal than is absolutely needed to carry on current business. If they had capital in proportion to their present business they could afford to extend their transactions, but not otherwise. One of the gray- i est symptoms of weakness is the high and prohibitive rate of interest charged on overdrafts and discounts, while the desire evinced to make irritating and petty charges for every small act of service done to their clients, leads to the belief that they cannot afford to be liberal, even in what were formerly looked upon as trifles. If the banks were to reduce their working expenses, and lower the current rates of discount and interest, their dividends would not be decreased, while the advantages to their clients would be enormous. An average strain of 10 per ceut. on business capital can only be withstood for a limited period. In fact, it is not too much to say that if the present state of things were to continue, the whole property of the colony would be absorbed by the banks in less than 50 years.