The Feilding Star. TUESDAY, NOVEMBER 1, 1887. Financial

Feilding Star, Volume IX, Issue 571, 1 November 1887, Page 2

The Feilding Star. TUESDAY, NOVEMBER 1, 1887. Financial

— **' I The action of the Directors of the ! Bank of New Zealand in abstaining! from paying . dividends for the half year ended September 30, has created j in the colony, as well as at Home, a feeling of unbounded astonishment. l As a natural consequence, shares hare fallen rapidly, and London telegrams inform us New Zealand stocks hare also suffered. The reason assigned by the Directors for the smallness of the profits during the last year was that by the fall in values of nearly all colonial products they had to contend with a state of commercial and industrial depression generally prevalent in the colony. They admitted the bank had overtraded, and like Wilkins Macawber, trusted- too implicitly in "something turning up,*' or, as the Chairman put it, " they had all along hoped that in the ordinary cycle of commercial changes a reaction would before now have set in." We have read the report with some carp, and we observe that not one word is said on the subject of the bank indirectly assisting to make the depression by trading in opposition to the merchants and other business men, from whom a forge proportion of the profits of banking are supposed to be derived by the transaction of legitimate banking business. Another mistake was bidding high rates of interest on fixed deposits, when, by indiscreet advances on real estate, or other dead seouri» ties, they had contracted the capital at their disposal, and outside money had to be got at any sacrifice to carry on the ordinary discount business. Six per cent., at twelve months left a very small margin for profit after that rate and working expenses were deducted. In fact, considering the amount of admitted losses, we do not believe one farthing of profit was made, but actually a loss sustained on these. Experienced men, such as the Directors were accredited with being, ought to have known that inducing small sapitalists to lock up their money in fixed deposits at long dates was taking out of circulation money which had better been left to flow in the ordinary channels. In a young agricultural country like this it would have been better to have given a mere nominal interest, so that farmers could have had the option of borrowing money at such rates as they could afford to give, and not have been crippled, as they were, by the exorbitant amounts charged for accommodation by the banks which acted as " middlemen." When too late bank directors discovered their mistake, and cheeked the influx of deposits by reducing the rate of interest. Although we do not anticipate there will be any very large withdrawals, yet it may be assumed a considerable number of persons will cast about for other means ef employing their money where more tangible security is offered than a mere bank receipt, and the item " fixed deposits" in the bank returns for next half-year will certainly exhibit a perceptible contraction. On September SO, the Bank of New Zealand held £2,920,356, and the other Banks £4,560,015 in fixed deposits. The total liabilities of the Bank of New Zealand were £5,264,608, and assets £8,503,997, of which the public owed notes and bills discounted £1,425,722, overdrafts, &c, £6,166,785, making a total of £7,592,507, leaving a margin of £2,327,899 in favor of the Bank. From these' figures it will be seen the Bank of New Zealand is in a perfectly sound condition, and although the shares may fall in price, they will be greedily bought up investors who know how really valuable they are. That the credit of the colony has re ceived a blow we are compelled to admit, but as soon as the full circumstances of the case are laid before those interested at Home, a re-action must set in with re-doubled force.