BANK OF NEW ZEALAND

Hokitika Guardian, 16 June 1922, Page 4

BANK OF NEW ZEALAND

WEI.EINGTOX, June Id

'I lie annual meeting id' proprietors was held at noon. Mr George F.lliut .Chairman ol Directors) presided.

With the consent of the meeting, the report of Directors and the Halance Sheet were taken as read.

The Chairman, in moving their adoption, said :—The balance sheet and profit and loss statement which we have ix'fore us to-day record the results, so far as this Hank is concerned, of one of the most trying and difficult years in the. business bistorv of New Zealand. RESERVE FUND.

In terms id' tbe report, which you adopted at our last annual meeting. L l.i(),l!!!l) was trausl'ei red to the Reserve Fund out of the profits for the year ended 31st .March. 1021, and you a:.' now asked to approve of a transfer of a lilo- amount from the profits ol the past year. This will bring tiie amount of the Fund up to L'i ,b7O,d!KI. The total of Shareholder.-' funds in tin- Hank, including the cany torwaid. will then amount to to, HO,'Ms. These figures do not include the I per cent Government Guaranteed Stock of CO2O,OSS 30s (id.

Notes in vimdntiou.— C 1,291,23(1. There is a decrease oi L'l 17,202 in tins item.

Deposits. 1'25,(i7(i.1'03. Deer use 100,790.002. Hills payable and other liabilities. L‘3.71.!. 170. Decrease, CIIgS.OOS, i.mainly due to falling olf of sales ol J.ondoii Exchange. PROFIT AND FOSS. 'Flic result of tin- year's operation.' lias been quite satisfactory, notwithstanding a falling olf of FI 10,213, acompared with the previous year’s pm tits. The decrease is largely the li'siilt of our overhead charges being greati i by Cl 10,-152, of which C 02.710 is in (li item Rates and Taxes. It was explain cd to you til the last annual meeting that the exceptional profits then de dared were mainly due to tin- benefit ol unusual exchange rates and to tli handsome returns received from oui large investments in I.omhni.

'the profits now under review include sin pluses on book r allies ol maimed investments and invest menl s which we realised (after the sudden and unexpectedly heavy rise in stocks in London) in order to meet the requirements of our customers in the Dominion.

Kxohange profits in the earlier part of the year were unusually high, but have since fallen off considerably, and a further reduction is to be looked for. For these reasons, and also because financial conditions in the Dominion are not entirely satisfactory, an addition r.f (.'!>!),'>lfi has been made to the carry forward, which now amounts to £430,818. BOA It I) OF Dll? Ft TOIIS.

In the usual course, the period for which .Mr Reece and myself had been appointed to serve as Directors expired on 31st March, and we were then reappointed by the Government lor a further term.

Air Beauchamp left New Zealand early in April on a visit to the Old {'nullify, and the Hoard did me the hnmmr ol electing me to the chair In the present year. I?AT’K OF INTEREST.

The minimum rate of interest on overdrafts in New Zealand has, for the last fifteen months, been 7 per cent. As exception is now being taken to the continuance of that rate, in view of the present cheapness of money in London. J take this opportunity of stating the reasons which have necessitated the maintenance of our apparently high rate.

Il is doubtful, if during tbo AVnr poriod, ti.ud for sonio timo alter, any 1 Iritis 1 1 ooimnunity enjoyed such a low rate of interest as did New Zealand. AVben the Banl; of England rate was 7 per cent, and British Treasury Bills yielded (it per cent, the Minimum Overdraft Bate in the Dominion remained at the pre-war figure of o.i per cent.. Owing to tile ahno'rmal demand for money hv our customers in New Zealajid which set in towards the end of 1020, it been me necessary for the Bank to sell a number of its British investments which yielded a high rate of interest. In order to provide for the loss of interest due to these transactions, to meet higher ' rates of interest itllowed <m Fixed Deposits, to cover our over increasing expenses, to check borrowing a much as possible, and to induce customers to realise assets, the rate of .interest on overdrafts was raised to (hi per cent. As a matter of fact, just prior to that period, the Bank, to ipeet 'the necessities of customers discounted at the then Bank of England rate of 7 per cent;, some millions of pounds of British Bills and Tent the proceeds on overdraft in New Zealand at (i per cent. Such a state of affairs eould not of course continue indefinitely. Owing to the excessive importations which commenced in the middle of 1020, and in view of the unfavourable outlook for some of our chief products, it soon became apparent that it would ho necessary for us t» continue, realising our gilt-edged investments if wo were to

stand by our customers to the fullest extent possible. As time went on, the position became more acute owing to the fall m the value of land, produce, and live stock; increased taxation (which, as far as the Hanks are concerned, is much higher i Xew Zealand than in Great. Britain) had also to be faced, and it was. therefore. decided to raise the rate on overdrafts to 7 per cent ' T In 1915 the Xew Zealand Income. 1 m wo paid represented a charge of tlirtc shillings per cent, on the average o o advances in New Zealand. ' 1 past year, the charge will be tb . £0 A P art M al’together from other '"hreasod costs of carrying on our h'.siucss the •Bank, owing to the rise m Income T< alone is getting a smallei i percontnge nCnv °J\ * i;i : n drafts at 7 per cent, than it Bd » 1915 when its minimum overdiuft r.i was 5.V per cent. It is an easy calculation-! per cent less .‘Ms. for Income Tax. leaves the Bank with £o 6s pc cent. now. as against £» < s 1,1 It is fallacy to suppose that icdu tion of the Bank of England rate necthsaril.v means a reduction m tin draft rate here On the coiiti. • dev dertnin circumstances it .. ho k mean an increase. Every hank >nJin Empire requires to keep ■ . ■ amount invested in Übdon in mmmdiatcly realisable securities. As Bank of England rate fnlK «» ,l s interest return on such investment . Tho position at present is, that o" Loudon funds. - whiel, from 55 per cent, to >1 - - pcn t.. the overdraft rate here was b 1 now yields us 2J per eeut. . , It cii.unot he too strong > empmr that the first duty of a bank s t tdepositors, that ample cash and tl immediately realisable assets m«s maintained for then pi'that the extent to which t '«« ' wants of borrowers must be regular ’'"it“is"admitted that during the last two ven-s (be Bank has. from set era causes earned large profits but these will bo non-recurring. . . Our advances in the mneb higher than we care to M* and are justified unit b> the - need of so many nf our eiislmners. t v our consciousness Unit *" Ua J- ' majority of cases it is only n matte, reasonable time for the position to rigid itself. As these advances me- - our London reserves will lie built up. but they will lie built up m ,ln v> molds yielding a much lower reU.ru than, those we had to reansc. It is not the 7 imr cent, rale Um > embarassing farmers—.wlm are the cl . f complainants —it is the ridiculously high price that, in many cases, was paid loi land, which not infrequently is mortgaged for more than its actual value. Another in use is that far larger areas were bought than the purchasers means warranted. In still other instances mortgagors, in order to secure |,, x r -te ef interest., borrowed r,n ! mortgage sums which gave them no i margin of funds to meet contingencies, and cannot now obtain further advances from the mortgagees. Idealisation of the whole or portion of their land is the solution of the difficulties, ami not a mere reduction of their interest j (barges. . . . . The iip’cniuni rate e: interest within I the Dominion on mortgages and oilier | adva.nces may. until the end of 1921. he I regarded as <>.’ per cent. Parliament having fixed that figure as the rate on moi tgages covered hv the Mortgages ■ and 'Deposits Extension Act of H'-’l. The minimum overdraft rate is "snnll.\ ■ par cent, or 1 par cent, higher than i the mortgage rate, as interest is charged by the banks e;ilv « ■> th‘> dadv <lc,l it balance, and lint nil the amount which the cost outer Ini- the ri'dii 1“ drau to. If tho hanks clui'ved their customers interest on the limit they agreed to lend, the ba.uks could reiluc.' : rates and make more profit than under the present system, whit h operates entirelv in favour of the customer, i STATE BANK.

The establishment of a Stall 1 Fan! H' the Dominion, is being ad\o.-ited in cerlain quarters, but as the position has no| been fairly and fully put to the public, it is desirable that the success which has been attained hv that insti tut ion, lounded !) y.-avs ago. warrants the foundation of a similar institution in Now Zealand. The conditions in the two i mint ries a.ro. however, entirely different. One -third of the capital oi the Bank of New Zealand is owned by the Slate, and the Government up-

points a majority of the Board of I).rectors. The State link referred to. whit It serves a population of too re than four times that of Now Zealand, hanot. during the !) years of its existence.

made any contribution to the pnhlfi revenue whatever, either in the shape of dividends or taxation True, it has amassed a surplus of £3.792,72(5 which remains in the business, and is pro ticallv its working capital. The llaitk of New Zealand, on the' eont rarv, during last 9 years, baa, exclusive of £37o(X)l) Bonus Shares issued to the Government. contributed 1° the revenue of this countrv no less a sum than £2.171.150.

The rate of interest (barged to the public on overdraft by the State Bank is fi per ecii.t., whilst 7 per cent is charged by Baltics in New Zealand. II our Government were to place the Banks in this Dominion on the same basis as that of the State Bank, as (nr ns rates and taxes are (oncerned. (he. rate for advances here oettld be at once reduced.

In the Host Ollice Savings-Bank and the Advances to Settlers Department. the country already has two organisations that, as ,n combination, to all intents and purposes meet the objects for which alone a State Bank might l-e justified. Hut do taxpayers realise what is lost In the State in Income Tax alone, through the business done by those organisations bavin been diverted from the ordinary Banks.

Taking the figures of the Iwo Gevernmerit Departments at 31st AJareli, 1921 the extra Income 'Pax for the year which would have been -paid by the Banks had the business been in their hands, would have amounted to nearly three quarters of a million Thai is one of the undisclosed losses to I lie State arising from Stale enterprises competing with private enterprises. EXCHANGE.

The Loudon Exchange problem of a year ago has—for the lime til leas! passed nwnv, the remittance of money to England is now being effected without niiv difficulty, and selling ralqs have been substantially reduced. During the year several loans of considerable amount liave been raised in London by our own and Australian Governmeuts, while a number of Local Bodies have also borrowed there, and thus increased the amount of credits available.

LAND VALUES. Instances have come under our notice of farmers, who paid unreasonably high prices for land, having been obliged to forfeit Ihe .portion ol the purchase money (often running into thousands of pouiidsY which they had paid, and to hand back the pronerty to the vendors. Other vendors have written off Inigo sums due to them to induce- the purchasers to remain on the land, and further losses, wo fear, will have to he faced before bed rock is touehed. None of those losses. .however, need occasion alarm as to the

stability of the 'country, because the proportion nf failures will he small. j THE OUTLOOK. j During the next, five or six months, j a continuance of the present stringent j conditions is to he ex|>ceted —indeed, I we shall be foi fiinate if conditions do not become more acute. Very litfie j money will he coming into the Demin-j ion, owing to the usual seasonal contraction of exports, hut there is every indication that by flic end of the year wlii'ii proceeds of produce become available. a gradual improvement will set

Boom effects cannot he gol over without serious Dials and much hardship—the penalty must he paid. The school of hard experience* must, by now, have taught our producers that juices are determined, so far as this country is concerned, mainly liv the purchasing |I„W, r"I the peep!" ol Brent Britain, and that any alt: nipt to bolster up prices beyond 'he l purchasing power is foredoomed to failure. Conditions in Europe may gradually improve if some satisfactory solution of the economic difficulties ol the Continent can l:c arrived at. Such a solution would benefit our chief customer. Great Britain, in wlio'-e destinies tl prosperity ol this Dominion is involved. The natural advantages nf our countrv are very gnat indeed, and if our people will accommodate themselves to the altered conditions, and he of good cheer, we may confidently look forward to a steadily, though p wliajis slowly, improving position.

What is most needed for a nation's progress is honest individual effort. : whole hearted servin' ' should ho each man’s watchword : Miall we not then, each one of us, shoulder cur responsibilities, and see to it- that our work is Bond. I now move that the report and bnlniue sheet as submitted to the meeting lie adopted. Mr ].?. \Y. Kane said :—ln accordance with tin' usual custom, it devolves upon me. to second the motion ler the adoption of the report and balance sheet. , , As 1 was absent from New Zealand on the oc-asion of the last half-yearly general meeting, held in December, when I was ve-elecled by the shareholders as one of Heir representatives (l;1 the I inrd, I take this opportunity | of personally thanking them for again ret.inning me. and ol assuring tucm that their interests will continue to receive my most cardul attention. The Chairman having dealt very fully in his speech with the business and ramifications oi the Bank generally. I propose to confine my few ron..:iks tc the impressions which I formed iii lev ret cut visit to London, .v'here Inning been asso. -kited with the London Directors, I enjoyed the fullest oppart unities, not only of discussing the Bank's business with tic lit, hut also of benefiting by their matured knowledge cl London financ \ As l/i the London slab. I can say with, confidence that the Bank s nflnirs

are in capable hands, and that nnih i |he ably guidance cl' ill London Board these officers will maintain unimpaired th . Ugh reputation that Ibis Hank enjoys in Loudon financial (irclcs. in conclusion, ko me say how pleased I W.'s to observe how high the ere ’d of this c'Mttdrv -funds in the v.ac Id finaicial rcuir". No Better evidence of •J.; s svatiding •■mild be desired lhau the ievent dotation in London of a New Zealand loan on terms, I believe, nettor than any obtained by a ( olnniul Boverument since 1913.