Bank of New Zealand.

Feilding Star, Volume XVII, Issue 52, 29 August 1895, Page 2

Bank of New Zealand.

THE COMMITTEE'S REPORT.

IMPORTANT PROPOSALS.

1 Pur J';-;:ss Association.] Wellington, August 27. J' , ; Committee appointed to enquire into ,uill report upon the Bank of New Zealand Estates Company, and its relation withjthe Bank of New Zealaud, to enquire how in the Colony's interest the in two institutions can host be separated, and how the earning power of the B£,nk of New Zealand my be increased, its stability insured, and its usefulness extended, has the honor to report as follows ; - Before proceeding to investigate the matters referred to by both Houses of Parliament your Committee received from the Colonial Treasurer the following letter addressed to him by the Directors of the Bank of N.Z., which explains why Parliament has been called upon to deal with the question: — Bank of New Zealand, Wellington, August 17, 1595. Sir, — I havo the honor to quota for your inform.ition the following- minute passed by the Board ot the Bank nt a j meeting held this morning:. A P.irliaI mentary Committee to enquire into the affiirs of the Bank of N.Z. Estates Co. and the Bank of N.Z., with n view to separating the Estates Co. from the Bank, and increasing the earning power of the Bank— lt was resolved to place on record that it was the desire and expressed wish of the Directors made at a Conference with Ministers that a Committee of both llouse3 should be appointed. I have, etc., W. Watson, President. The Hon. the Colonial Treasurer, Wellington." Your Committee have, since they were appointed, been continuously and carefully engaged iv going into the several matters referred to, and have had before them the President of the Bank, Mr Watson, all the directors of the Bank of New Zealand, the auditor of the Bank, Mr Foster, the General Manager of the Estates Company, Mr Lyons until recently employed as Manager of several of the properties of the Estates Company, Mr McKorrow, Land Purchase Inspector and Mr McGowan, Commissioner of Taxes. Your Committee have had before them the balance-sheet of the Bank of New Zealand, the balance-sheet of the Estates Company and Auckland Agricultural Company, combined bal aucc sheets and statements concerning t)ic business of the Bink and the Assets Company which are appended to the report. Your Committee iind that the present Directors of the Bank are not responsible for the present unsatisfactory condition of affairs. The Committee conbider that the present Directors have acted efficiently since they took office and have candidly and fully given every information to the Committee. There is a deficiency of L 376.900 and a contingent dependency of L 200,000 in the Bank. There is a deficiency of L4(37,007 in the Estates Company against which no assets exist, and a further delicicucj' of L 444.601 in the trading concerns and properties outside of New Zealand, these altogether amount to L 1,458,578. Of this sum L 145.110 which though shown as a liability, is really a debt due by the Agricultural Company and represented by assets. Deducting this from aforesaid sum of L 1,488,578 there remains L 1,340,468. This is provided for as follows. Capital of the Bank L 900.000 ; estimated amount of call L 450.000 ; total, 1,1,350,000, leaving ] a balance of L 9.582, which goes to a dependency account. Your Committee are of opinion that in the present financial circumstances of the colony, and taking into consideration the financial position of the Australian colonies, and also considering the magnitude of the interests, both public and private, which are involved, as well as the widespread disaster which would follow should the Bank be compelled to suspend operations, the colony should render such assistance to the Bank as will restore confidence, ensure sfccibiliiy, and enable it to carry on its business in a satisfactory and profitable manner, the Committee are of opinion that any assistance should be of an effective and definite character. In support of the Committee's opinion, it may be stated that it has been found that apart from any indirect injury to the country tho following interests would be directly affected by any disaster to the Bank as will be seen from the returns annexed. There wore on March 31st, 1895, in New Zealand and the other colonies and London deposits in the Bank of New Zealand to the number and amount as follows— New Zealand: 37,110 depositors representing .£5,032,000 ; other colonies, 2,839 depositors representing j £530,223 ; London, 3,351 depositors re- I presenting £1,578,632; Totals, 41,300 depositors representing £7,141,755. This includes Government deposits amounting to £1,U.\89Q. The total number of the advances by the Bank on March 31st, 1895, amounted to £7,192,653. The total number of advances by the Bank on 31st March, 1895, and amount of same in New Zealand, the other colonies and London, wore as follows : — New Zealand, 15,593 advances, amounting to L 3.428.222 ; other colonies, 1,227 advances, amounting to L 1,463,516 ; London, 137 advances, amounting to L 300.915. Totals, 17,007 advances, total amount, L 7,129,653., 129,653. The shareholders in New Zealand number 1,101, liable f0rL403,000. There are 115 branch banks and 28.584 current accounts. The discount account, representing traders' acceptances, equals L 456.000. The colony of New Zealand, independently of the "A " stock of L 2,000.000 and remittances in transit, is a creditor to the Bank for L 1,408.000, the amount in New Zealand being L 458--,-000 and in London L 945.000. From the evidence taken and the balance sheets submitted it will be found that the Bank of New Zealand and the Estates Company, though two in name, are practically one institution ; that the Estates Company and the Auckland Agricultural Company, though under different names are practically one concern ; and that the combined Estates Company, Auckland Agricultural Company and Bank of New Zealand are practically one concern. The division is in name only, because the whole of the shares iv the Estates Company are owned by the Bank of New Zealand, the only interest held outside the Bank being the debenture holders, who recently acquired L 500.000 worth of the debentures previously held by Baron Schroedcr, and the debenture holders of tho Auckland Agricultural Company, who hold L 2.829.000 worth of debentures. Your committee is of opinion that it would be in the best interests of the colon j r , of the shareholders, of the Bank of New Zealand, and of all concerned, that a separation of the affairs of the Bank of New Zealand and the Estates Company should take place. In dealing with so momentous and intricate a question it is necessary that every precaution should be taken to safeguard the colony against losses, and to render future application for the intervention of Parliament unnecessary. To effect this your committee recommend — That the whole of the freeholds, leaseholds, stations, stock and implements in New Zealand be disposed of, and that the Bank or' New Zealand and Estates Company soil them to a Realisation Board, to be established for that purpose. That au Assets Realisation Board consisting of three members fee created

as hereinafter provided. That the Assets Realisation Board bo authorised to issue bonds for L 2,784,000 bearing Sh per cent, interest, and that the deficiency, if any, on these bonds after the realisation of the New Zealand Estates Company's properties be guaranteed by the colony to the Bank. In return for these the Bank of New Zealand, the New Zealand Estates Company, and the Auckland Agricultural Company to transfer the whole of the property referred to to the Realisation Board for liquidation purposes. That L 500.000 of the uncalled reserve liability of the Bank of New Zealand shareholders be called in in four equal instalments, the first being payable on 30th June. 1896 ; the second on 31st December, 1596 ; the third on the 30th June, 1897 ; and the fourth on 31st December, 1897. That to encourage the shareholders of the Bank to meet the call of LoOO.OOO proposed to be made, your committee recommend that the first charge on all annual profits of the Bank beyond L 50.000 per anunm should be a payment of interest not exceeding 5 per cent, on the amount paid by shareholders on the call as aforesaid. That the Bank of New Zealand oat of its profits pay to the Assets Realisation Board the sum of L 50.000 per annum as hereinbefore mentioned, and any further sum which may remain after paying 5 per cent to tbe ordinary shareholders until any deficit on realisation is provided for. Your committee are of opinion that the last valuations of stations and lauded property may under favorable circumstances, be maintained but the more prudent course would be to allow for further depreciation Your committee further recommend — That to insure the colony against loss on account of guaranteeing any deficiency that may arise on bonds, in addition to the payments from profits above provided for, security be given over the freeholds, leaseholds, stations, stock, and implements in New Zealand, the Bank's latest ascertained value of which is L 1,879,000,, 879,000, and over the second call of L 500,000 and also over the. balance, L50f),000, of uncalled reserve liability of the Bank shareholders. That the first call, the last amoiint of which is due on on 26th November next, estimated to aniouut to L 450,000, together with the present paid up capital amounting to L.900,000, bo written off to provide for losses, and includes L 9558 which is proposed t be held as a dependency, aud L 200,000 as a contingency for unascertained loss. In conjunction with this proposal and to enable adequate capital to be provided for the Bank to carry on its business and to restore its credit, your committee recommend that the Colony should subscribe Li") 00,000 for preferential shares, bearing 3| per cent interest, and that they be paid for by the issue of 3\ per cent stock to the Bank. The Bank to have the right to purchase any or all of these shares provided they are sold, the preset t Bank shareholders to have priority. This with the liooo,ooo of capital from the second call of the reserve liability will give the Bank a clear capital "of £1,000,000 sterling. In addition to this the position of the Bank will be strengthened by having the whole of £2,000,000 of " A " stock for use in its ordinary business under the altered position that the Bank will occupy. These proposals, if given effect to, will put it on a sound basis. On investigation your committee ascertained that the second million "A " stock now invested according to law in liquid securities entails a heavy annual loss on the Bank. To prevent this rocurring loss, and in order to increase the earning power of the Bank, your committee recommend that the million be freed and made available for use in the Bank's general business, and to further enable the Bank to increase its earning power, your committee are of opinion that the Bank should be at liberty, if deemed available, to secure further trade by purchasing other banking business, but that no purchase be allowed unless with the sanction of the Governor-in-Council, and that to enable this to be done Section 3 of the Banking Act, 1894, be repealed. And, further, with a view of increasing the earning power of the Bank, the committee recommends that the Colony's business in England be transacted by the Bank of New Zealand. The Directors of the Bank are of opinion that if these recommendations be given effect to, the returning power of the Bank will so increase as to leave a profit of £135,000 per year , that in consideration of £500,000 preferred shares to be taken up by the Government, the colony should have further representatian, and that the Goyernor-in-Council be empowered to appoint one Director ; that the Assets Realisation Board shall consist of three ruemhers, and inasmuch as the colony has guaranteed the deficiency if any on the bonds to be issued by the said Board, the Governor-in-Council shall appoint two members and the Directors of the Bank of New Zealand one member. The committee are of opinion that shareholders of the Bank should be prohibited by law from winding up the Bank until the whole of the obligations to the colony are repaid. This is an obvious precaution considering the large responsibilities of the Bank to the colony. And the committee also recommend that the power under the Bank Guarantee Act, 1894, be amended so that the power to appoint a Receiver shall arise on any default of the Bank. The proposals of the committee deal only with the landed properties, stations, stock, and implements, in New Zealand. Trading concerns, both in and outside New Zealand, and the properties owned by the Estates Company outside New Zealand are not to be transferred to the Estates Realisation Board. The directors of the Bank of New Zealand have informed the committee that the latter properties may be realised in two years. The directors have so far written them down in value that the committee is of opinion that there need be no delay in carrying out these realisations. The details of the trading con- , cerns have been appended. They are for sale, and it would be inadvisable to furnish all the details concerned with them. With the papers appended to the report, will be found a scheme submitted by the directors of the Bask of New Zealand. The committee did not see its way to accept it, seeing that it entailed heavy obligations upon the colony which the circumstances of the case did not warranb. The Colonial Treasurer also submitted a scheme. The distinct feature was that the colony did not directly issue stock to the Bank as against the assets of the Estates Company, but in lieu thereof as a last resource the colony guaranteed the deficiency on the bonds. Sir R. Stout also placed before the committee certain resolutions. These will be found with the papers appended to the report.— Chas. C. Bowkn, Chairman.

The New Zealand Clothing Factory j have just opened a special lot of pine wool underclothing " Dr Lariiz's medicated," which is invaluable during winter weather for the cure of Rheumatics, Gout, Lumbago, etc. These goods are sold largely in the south for the prevention of cold. We also have the toilet soap, laundry soap, extract and pine wool oil, also footsoles, which are the most comfortaMe socks to be had. — Adrt. John Cobbe is offering special induce|mentsto buyers of ladies' Levant and kid shoes. These goods were bought to his order in England but by error have been sent out with square instead, of pointed tees ; the marked prices range from 9s \ 6d to 12s 6d per pair, ho is now selling ' them at 5s lid and 6s lid.