BANK OF NEW ZEALAND

Hokitika Guardian, 18 June 1920, Page 4

BANK OF NEW ZEALAND

ANNUAL MEETING AT WELLINGTON.

YELJANGTON, June 18. The ordinary general meeting of the proprietors of Bank of New Zealand was held at the Head Office to-day. Mr H. Beauchamp, chairman of direotorß, presided, the consent of the meet-: ing, the report oil the directors and the balance-sheet were taken as read. The Chairman, [in moving thejf adoption, said:—• ’ '■ ’* : * /'■■■."■ 1 Copieß of the report and balance-sheet are in your and I will now reiaark upon the yajiqns items Where fluctuations in the figures seeni to gaii for any comment from me. / \ ‘ Capital.—-£2,627,441 j # 347 >' 453. This inerfaff'-- the amount peid up by ’shareholders in advance of due date in respect of the call made on 9th January last on the ordinary shares Nos. 1 to 160,000 inclusive, the circumstances and conditions of which word mentioned at our meeting on 10th December last. It will be* peen that a large number of shareholders

availed themselves of the option allowed them of paying up the amount of the call before the due date (Ist April) under rebate at 6 per cent per annum, the whole call, with the exception of £152,546 13s 4d, having been received at the balance date. I ihay mention that of that amount only £44,261 remained unpaid at 2nd instant. Our issued ordinary capital is now £1,600,000, and the amount paid up, in respect thereof, at 2nd instant was £1,455,739. l Reserve Fund.-—£2,350,000; increase £150,000. This increase is the amount added to

the reserve frim the profits of the year

ended 31st March, 1919. As will be seen by the report in your hands, we now pro-

pose to increase the reserve fund by another £160,000, making the total £2,500,000. Noteß in Circulation. —£5,765,337 ; increase £2,037,088. The greater part of this increase is represented by notes not “ circulating ” at all in the sense of being in the hands of the public. They are notes of ours in

the handf pf other New Zealand banks, paid to them in settlement of Exchanges. . During the period of the commandeer, the transfers of Government moneys in payment of produce have passed through ns, as the Government’s bankers, and large amounts have, as a consequence, occasionally to be paid over in settlement. Adjustments are made with other banks at short intervals by paying in London in redemption notes issued to

other banks in the Dominion. Some- ■ times, particularly when a Local War Loan has been raised, the balance has been turned in our we have been holders of others Bank settlement notes, but at present the balance is against us, hence the large increase shown. I mention the matter in order to guard against any misapprehension arising in regard to undue inflation of the New Zealand currency. I do not think there has been any such inflation here. The increase since 1914 in the amount

of notes circulating in New Zealand, is I think, mainly accounted for by two factors: firstly, the gold which people used to carry about or keep by them has found its way into the Banks and been replaced by notes; secondly our exports have very largely exceeded our imports. .Owing to the exchange conditions, a large part of this surplus has accumulated in Britaip, but neither the exporter, the producer, nor the worker‘has had to wait for payment: these have received large payments or liberal wages, and it would bp remarkable if their prosperity had not caused an increase in the cirlating medium of the country. I would point out that magnitude does not necessarily mean inflation. Deposits.—£37,66l,6lo; increase £5,945,258. This increase reflects the 1 prosperous condition of the country, and will be more fully dealt with at a later stage of my remarks. Bills Payable and other Liabilities.— £3,708,306; increase £847,915. An ordinary fluctuation which calls for no special remark. Reserve for Taxes.—£34o,ooo. A new item in the balance-sheet, although not entirely a new provision, since in view of the very heavy liability to which the Bank is subject for taxation, it had been deemed prudent to accumulate a reserve against it. This reserve is sufficient to cover the estimated liability for one year in respect of Income Tax, and it has been decided to show it as a separate item in the balance sheet. While referring to this subject, I might mention, as a matter of interest to shareholders, that the Bank paid the following amounts last year for rates and taxes:— Income Tax £285,382 Land Tax 17,123 Tax on Note Circulation'... 146,074 Rates 7,904

Total £456,483 Turning now to the assets side of the Valance-sheet we have:— Coin and Cash Balances, Government Notes, Legal Tender Notes, Bullion.— Total £8,772,285; increase £2,052,520. Coin, cash balances and Government notes show a large expansion. Legal tender notee and bullion, a moderate reduction—leaving the net increase as above. Money at Short Call and Bills Receivable in L0nd0n.—£20,283,642; Increase £6,465,687. This increase represents roughly the growth that has taken place during the year in the Colonial deposits. As explained in my. address a year ago, these funds are held in gilt-edged securities, readily realisable at any time. In ordinary times our exchange operations with Britain and those with foreign countries which have to be settled in London, approximately balance one another. Taking the transactions of a whole year, there is no very great difference between the amounts which we receive in London and those which wc pay out there. During the last few years, and especially during the year which has just closed, the value of our exports which have been paid for in London has very greatly exceeded the cost of imports and other payments which have been made there. The tendency r has therefore been towards the accumulation of funds in London, and this is .the explanation of our now holding so j£ large an amount at that point. In accordance with our usual custom, provision has been made for the writing 1

down of all our London investments to a figure at whioh they are readily realisable.

Owing to the increased value of money in London, the funds we have employed there have been yielding a very satisfactory return. 1 Investments in the Dominiop.—£3,824,764; increase £548,602.

This increase is occasioned by the Bank’s subscription to the last New Zealand Goverment Victory Doan. , The assets incluued under this and the two previous headings-—Coin, etc., and money at short call, etc.—are equal to 69.75 per cent., or roughly 13s lid in the £, of the Bank’s liabilities to the public. , Commonwealth and Fijian Government Securities.—£239,3l7; increase £105,001. The increase represents further invest: ments made in the loans of the respective Governments. Advances.—

Increase. Bills discounted £1,002,233 £26,483 Advances ......... 17,929,615 539,828

£19,431,848 £566,311 This increase is comparatively small. The circumstances which have contributed to make it so moderate will be referred to at a later stage of my address.

Landed Property ; and- Promises.— £361,108; decrease £38,759. The sum of £50,000 lias again been ap : preprinted from profits in reduction of this account. It is this appropriation that causes the decrease shown. The usual outlay in respect of repairs, improvements, etc., is of course continually going on. Shareholders who have travelled throughout New Zealand and have seen a good many of our offices will understand that the amount at which the Bank’s properties stand in our books and in the balance-sheet is a very low figure*compared with their actual value. The writings-down for a considerable number of years have been on a very liberal scale, and I think it probable that for some time to come it may not be considered necessary to make further appropriations for this purpose. Some figures were recently published in one of the Banking Journals stating the proportion which the item 11 Banking Premises ’* bears to the Capital and Reserves in the case of a considerable number of banks throughout the Empire. These figures show that in the case of 22 banks in tbe United Kingdom, the 1 bank premises represented 20.93 per cent of the capital and reserves. In 17 banks in Australasia, the proportion was 14.48 per cent. 18 banks in Canada had 26.30 per cent of their capital and reserves represented by this item. Comparison with these figures will show that the 7 per cent of Jtliis Rank’s own resources which are thus represented is an unusually small proportion, and that.it cannot be. said that we have an unduly large part of our funds “ locked up in bricks and mortar.’’ profit and Loss. —The nett profits for the year are £419,046 as compared with £388,022 at 31st March, 1919. This is after paying interest on the Guaranteed Stock, making the usual grant to the Officers’ Provident Fund, and also providing for a special grant to that Fund of £IOO,OOO, paying bonuses to the staff, writing £50,000 off premises and furniture account, and flaking all the necessary provision for bad and doubtful debts and also for depreciation in the value of other assets. The amount brought forward from last year was £146,224, making a total of £460,270 now to be.dealt with after providing for the £105,000 disbursed in the 6 per cent dividend of December last. It is now proposed to pay a further dividend of 7-J per cent and a bonus of 4 per cent on the Ordinary and “ B Preference Shares (making with the December dividend already paid 174 per cent for the year), and a further 4 per cent on the “A ” Preference Shares (making 10 per cent forthe_year). This will make the total dividend and bonus for the year, £268,750. Of the balance remaining, £296,520, we propose to place £150,000 to the credit of the reserve fund, and to carry forward the residue, £146,520, to the next account.

Dividend.—ln view of the increase in the amount available for distribution, after making ample provision for all contingencies, the directors have felt justified in proposing a small increase in the rates of dividend and bonus on “B” Preference and Ordinary Shares. It is, therefore, recommended in the report now submitted to you that the total distribution for the year upon these sftares shall be 174 per cent., instead of the 15 per cent, which has been paid for the last nine years upon the Ordinary Shares and upon the “B ” Shares since they were created in 1914.

Aggregate Assets.—Before passing from my review of the balance-sheet figures I desire to direct you attention to the fact that bur aggregate assets are now nearly' £53,000,000, the increase during the year having amounted to £9,699,259. Board of Directors. —The members of the Board appointed by the Government, whose term of office expired on 31st March last, were Messrs William Reece and David J. Nathan. It is with great regret that we have to record Mr Nathan’s sudden death on 20th March. He had been a member of the Board for three terms of two years each. His wide experience and business knowledge made him a most useful director, and his valuable counsel was always made freely available to his colleagues in :their deliberations.

The vacancy caused by Mr Nathan’s death has been filled by the Government appointing Mr "George Elliot, of Auckland, who is widely known in business circles, a director of the Bank. Mr Elliott is with us to-day, and I have pleasure, on my own behalf and your behalf, in extending'to him a cordial welcome. Our old colleague, Mr William Reece, has, I am pleased to say, been re-appoint-ed a director. These appointments .are for a term of two years from 31st March last.

London Board.—We again place on record our high appreciation of the care and attention devoted by the London Board to the Bank’s business, there. The personnel of that Board remains unaltered. General Management.—Mr William Callender, to whoso retirement, after a service of fifty years, reference was made 'at our last meeting, relinquished his duties on 31st January last, and Mr Henry Buekleton assumed the position of General Manager on Ist February. Staff.—When we met you lasi year, I referred at some length to the relations between the Bank and its staff and in-

formed you that during recent years the scale of our officers’ pay had been considerably improved and that, to meet the exceptional circumstances of the times, substantial bonuses were being paid to all our .staff, a difference being made in favour of married men and others with dependents. As the cost of living showed no sign of coming back to what we have been iu the habit of regarding as normal figures, the Board decided some time afterwards to have a complete review and revision of all salaries. The pay ot every male member of the staff came under consideration, and tlie salaries of all were materially increased, the increases granted the men who wore drawing too smaller salaries being greater in proportion than those' given to the more highly paid members of the staff. These alterations in the scale of pay resulted in a largo annual addition to our charges. Su. stantial as this amount, was, the Board have felt that, in view of the steady rising cost of the principal necessaries of life, it could not be regarded as final, and a furtlier review of. the position lias now been undertaken.

As far as the younger members of the staff are concerned, this has just been completed and has resulted in a very substantial increase of pay being granted to all the less highly paid of these young men. It Will doubtless be of interest to you if I quote the scale which we have just adopted for the payment of our young men during the first ten years of ■their service—a scale whioh is not rigidly adhe'red to, but is subject to increase in cases, of exceptional merit. It is as follows:

First year £BS Second year 100 Third year 120 Fourth year 145 Fifth year 170 Sixth year 210 Seventh year 225 Eighth year 240 Ninth year 255 Tenth year 270

It will be seen that a youth who joins our service, as is usual, at the age of sixteen, may expect to bo drawing a salary of at least £2lO when he reaches the age of twenty-one. ■ 1 may add that, out of last year’s profits, we have paid a bonus of 15 per cent, to married members of the staff drawing £4OO a year or less, and 10 per cent to all officers. As this bonus was based upon the revised salary list adopt- 1 ted in October, 1919, it amounted to a considerably larger sum than similar bonuses in the past.' While treating thus liberally all the members of the Bank’s staff, it is the constant desire of the Board and of the executive, to discover those 'in the Bank’s employ who possess special qualifications, and I feel no hesitation in saying that there never was a time when the Bank’s service afforded greater opportunities than now for young men of more than average ability who endeavour to qualify themselves for the more important positions.

In fulfilment of a suggestion which 1 made a year ago, the Board have now arranged to make to the Privident Fund, in addition to the usual annual grant, a special’grant of £IOO,OOO out of the profits of the past year. This is by far the largest amount which the Bank lias ever contributed to the fund which provides pensions for the. staff, and it has enabled the scale of pensions to he very materially increased, so that an officer who has served the Bank for 40 years or more will receive an annual pension of 75 jk‘r cent of the average salary paid to him during the Inst 25 years of his ! service, instead of 75 per cent of the average of 40 years. The minimum pension for those who have colnpleted a full period of service, is being increased from £1.75 to £2OO, and the maximum pension to £700.' It lias afforded the Board great pleasure to lie, able, on the Sha reholders’ behalf, to provide for this material improvement being made in the provision for old age or disability of those who .have served the Bank during the years of 'their working life. Your cordial approval is confidently anticipated. As the increased scale of pensions did not come into effect during the past year the directors have, out of the Bank’s funds, supplemented by a bonus of 10 per cent the pensions whic here drawn last year by retired officers or by widows.

Here I would like to express our warm appreciation of the loyal and efficient services rendered by our staff in Now Zealand, Fiji, Samoa, Australia, and London. • GENERAL REVIEW.

The observations I have made complete the necessary review of the Bank’s affairs and of the figures of the balanceshee, and, before moving the adoption of the report and balance-sheet, I now, according to my usual custom, proceed to take a brief review of the general situation.

NEW ZEALAND’S FINANCIAL POSITION.

New Zealand has enjoyed a series of years.of solid prosperity, and, altiio the facts and figures have been presented in various forms, it will not be amiss to reproduce some of them in order to emphasise the point. The banking returns for the past qparter reflect the position very clearly. The free and fixed deposits disclose remarkable movements. The figures for a series of years are as follows:

As compared with 1914 the total deposits have more than doubled, but the gain is mainly in the free deposits—i.e., the current account balances, which show an increase equal to more than 150 per cent. The fixed deposits have increased by about 50 per cent. In' the six years 1914-1919, the deposits increased by £14,800,000, while in the past year, the gain is nearly £12,000,000. The phenomenal growth in the last year is probably attributable in great measure to tin; exceptional and large dis-bursements-—upwards of £18,000,000 — made by tbe Government in connection with the repatriation of soldiers, which must have increased Bank deposits to a very substantial extent. It is also due, in some to improved shipping facilities which have enabled a larger quantity of produce to be realised upon by exportation. j The returns of the Tost Office Savings

Bank afford evidence to the same effect, the figures of the Savings' Bank deposit accounts for the same period are as follows :

Wo understand that for the year ended March 31, 1920, this amount lias been considerably augmented, but to what extent we are not in a position to say ns the figures have not yet been 1 published.

The discounts and advances of the banks have grown t oa moderate extent

In the six years the advances and discounts combined have increased by the moderate sutn of £8,375,292. ■ In the last year, a decrease is shown. A glance at the figures of the country’s commerce throws a clear light on the causes of the movements in deposits and advances as above disclosed. Our exports and imports have been as follows :

From the year 1914 onwards the excess of exports over imports has been exceptionally large. In tht six years 1914-19 the exports have exceeded the imports by the huge sum of £60,559,584, or an average of over £10,000,009 a year. Here we have disclosed n further source whence banking deposits have been replenished and advances reduced or renered unnecessary—in short, the explanation of the present easy local financial position and of the prosperous conditions generally, prevailing in the country. But he would be a sanguine man who would affirm that similar conditions will prevail over the next ensuing six years. A continuance of such prosperity cannot be expected. It depends upon favourable world conditions, the prospects for which are at the moment, not at all encouraging.

N.Z. GOVERNMENT REVENUE AND EXPENDITURE.

The returns of revenue and expenditure for the year ended 31st March last show a satisfactory position. The revenue amounted to £26,081,340 and the expenditure to ... £23,781,925 Surplus for the year £2,299,415 Both revenue and expenditure have shown rapid increase of recent years, tlie former having more than doubled and the latter nearly doubled during the last five years. The progress discloseu is interesting and I therefore give the yearly figures:—

Adding the surplus for the year (£2,299,415) to the accumulated balance at 31st March, 1919, (£15,239,561), we have a total of funds in hand of £17,538,976. Of which £15,180,250 are in “ Investment Account” and presumably represented by securities on hand in either the Dominion or London. No doubt Repatriation Advances bulk largely in this total. Mr Watson said:— According to our custom, now time honoured, it is my turn to second the motion for the adoption of the report and balance-sheet, which I have much plcasuro in doing. The chairman has left littlo to say regarding tho business of the Bank' but as one of the elected directors I may, without transgressing obligations of secrecy, briefly state my own views as to the prospects and value of your property.

The general position of the institution I regard as, commercially speaking, unassailable. Intrinsic value of security, rather than current value is our watchword, and full precautions have been taken against any decline in prosent market values.

You will have noted with pleasure the large increase of business since last year, and you will also note that in the proposed distribution of profits £150,000 is allotted to reserve fund and £50,000 to writing down premises and furniture, tlie latter being already much below Government valuation. And looking back for many years you will note that the same procedure has been adopted. Now as these constant additions to reserve funds and writings down of

property practically mean accretions to tho capital with which tho Bank trades, tlie benefits of them must in tlie long run accrue to the Government and yourselves, whatever shape such benefits may take. These increases to tlie Bank’s funds ■ carry corresponding earning power, and therefore it only requires a calculating rather than a sanguine mind to compute tho value of the goodwill which is an important asset not taken into account in the balance-sheet. In the prsoent day Banks and Insurance companies do not confine their operations to any one country, and looking ahead only a few years to the prospects of the Bank of New Zealand, they appear to ine as very good. I take credit to myself for having, before the establishment of the present Board, singled out your present General Manager, Mr Bucklelon, for rapid promotion. • His subsequent career has proved his merits, and your interests are safe in his hands.

I congratulate the staff m New Zealand, London, and elsewhere, on what wo'have been able to do for them by way of well deserved increases to salaries, allowances, and pensions. Here 1 would say to those who have the responsibility of advising youths as to the choice of careers in life that they should not miss enquiring what the Bank has to offer in admitting officers to its staff. I intend to stand again for re-election to the Board at the meeting to he held'in December next, and trust to receive the usual mark of your confidence.

March Quarter: Free Deposits Fixed Deposits , Total Deposits £ £ £ 1914 13,475,771 10,554,479 24,030,250 1915 ■ 15,958,732 10,870,507 26,829,239 191(5 19,091,949 12,182,104 31,274,053 1917 20,970,702 13,385,838 34,356,540 1918 21,614,302 13,891,195 35,505,497 1919 1 <)9f) 24,363,681 SI d SOfi 14,485,145 in ion 38,848,826 nn fifin.nm

At 31st March, 1914 £17,422/563 At 31st March, 1915 19,802,753 At 3st March, 1916 23,147,158 At 3st March, 1917 26,901,830 At 31st March, 1918 30,281,798 At 3st -March, 1919 34,454,130

only: J1 -P g a. O o rr, S cj C3 11 **' & o o m <5 cs > •V O 1914 £ 2,017,107 £ 21,649,643 £ 23,666,750 1915 1,634,418 22,106,144 23,740,562 1916 1,437,655 22,246,237 23,683,892 1917 1,552,863 26,142,067 27,694,930 1918 1,223,465 28,094,431 29,317,896 1919 1,484,612 30,719,032 32,203,644 1920 1,280,188 30,761,854 32,042,042

u ci ** in cn g,l H a iw S o M "2 b . Ih in t, § js o a x a S 1 in X - .6 a . 6 w , £ .■£ £ 1910 22,152,473 16,748,223 5,404,250 1911 18,980,185 18,782,608 197,577 1912 21,511,626 20,576,579 935,047 1913 22,810,363 21,653,632 1,156,731 1914 26,253,925 21,144,227 5,109,698 1915 31,430,822 20,658,720 10,722,102 191(5 33,281,057 25,045,403 8,235,654 1917 30,613,184 20,742,124 9,871,060 1918 28,438,187 24,131,729 4,306,458 1919 52,573,520 30,308,908 22,264,612

Year ended Revenue Expenditure. 31st March £ £ 1915 ... 12,451,945 12,379,803 1916 .... 14,507,530 12,493,107 1917 18,355,194 14,058,770 1918 .... 20,206,222 15,120,288 1919 .... 22,352,372 18,673,599 •1920 .... 26,081', 340 , 23,781,925