BANK OF NEW ZEALAND

Hokitika Guardian, 15 December 1922, Page 4

BANK OF NEW ZEALAND

HALF YEARLY MEETING. WELLINGTON, Dec. 15. The half-yearly general Meeting was held to-day, Mr George Elliot (Chairman of directors) presidingg. The Chairman said This is a halfyearly general meeting, as prescribed by “ The Bank of New Zealand Act, 1903.” Hitherto at such meetings you have been called upon to elect one of your number to be a member ut the Board of Directors of the Bank, but, ns the amending Act of 1920 provided for the term of office for all directors being extended from two to three years, the next election of a shareholders’ director will not take place until December, 1923. As usual at half-yearly meetings, no statement of accounts is submitted for your consideration, but 1 may say that the profits for the half-year are satisfactory, although they arc considerably less than those of corresponding periods for the last few years. You may remember that at the last annual meeting it was indicated that the large profits earned by the bank during recent years were due to a combination of unusual circumstances, principally in London, and that such large profits could not. in the ordinary course of business, be maintained. This lias proved to be the case; circumstances have changed, and the change is reflected in the Blank’s earning power. . . Nevertheless, wo arc in a position to pay:— An interim dividend of Is 4d per share on the ordinary shares, which will absorb C 150,900 A dividend for the year to 31st March next on the preference ‘A’ shares held by the Government ... 50,000 An interim dividend on the preference ‘B’ shares . held bv the Government 25,000

Muhin*' a total distribution of ... £225,000 The dividend will be payable in Wellington to-morrow, and at the various branches on receipt of advice. Hitherto dividends on the ordinary shares have been paid in unequal portions, the smaller portion being paid at the end of the half-year, and the larger at the end of the lull year. It was intimated at the last annual meeting that future dividends would, as far as possible, be paid in two equal amounts. Such a course is now being inaugurated, but it must lHtfc be assumed that, because the interim dividend is larger than in 15)21, the total dividend for this year will be on a higher scale.

I ain, glad to be able to assure you that full provision has been made lor all known or probable losses. As you know, our colleague, Air Beauchamp, left in April last on a visit Lo the Old Country, lie returned last month. I am pleased to sav, with renewed health and vigour. Me has been in touch with banking conditions abroad, and Lite fresh knowledge he has gained will he of value to the Bank. We welcome him hack to our councils. Since it does not scent to he fully understood that the largo profits earned by the (Vink during 'the last t*’w years were, to a. considerable extent, made outside New Zealand, it is advisable to draw intention once more to that fad, and also to the conditions which brought about those large profits. You may remember that our funds in London el the end of 1919 had mounted up to over twenty millions, anti it arts practically impassible to transfer any large portion of the surplus to New Zealand or to Australia. Foriuunfoly for us, however, exceptionally high interest rates ruled in Loudon. British treasury Bills yielding as much as (:! per cent., whilst the Bank of England discount rate went to 7 per cent., so that our funds in London yielded unusually good returns. Our exceptional profits were due, therefore, to an abnormal set of Circumstances. During the period referred to our borrowing customers in tho Dominion were charged a lower rate of interest than we obtained in London mi the most gilt-edged ami liquid securities in the world.

The preseiii year has again witnessed a Midden change in the London interest and exchange rates, but this time the change is adverse to us. Our funds have once nmre mounted up in London much in excess of our requirements, hut interest rates there are exceptionally low, Treasury Hills bringing iu 2J per cent or less . \\’e feel called upon to reply to the unfair criticism to which the Hank has suhjoetocl during the recent Parliamentary Election campaign hy many of the candidates, who advocated the establishment of a State Hank; at the same time, we recognise that the ramifications of finance are so extensive and far-reaching in their results as not to he easily understandable hy those who have not the .opportunity of acquainting themselves at first hand with the real position of affairs. It would he well for the public to remembei that the criticism of inexperience is necessarily of little value and it should therefore he largely discounted. We do not resent fair criticism, but we do object to wilful misrepresentation through the suppression of known facts, which, if stated, would put an entirely different complexion on the position. For instance, it is well known that the Hanks in this Dominion are far more heavily taxed than are any other taxpayers in the country or even in the Empire. It is simply wilful misrepresentation to compare the interest rate of the Hanks here with those ruling elsewhere, without taking into account the much more favourable conditions existing outside the Dominion—more especially in the case of the State Hank of a neighbouring territory which makes no contribution whatever to the Federal or State Governments hy way of Income and Land Tax, and pays no rates to the local authorities. As a matter of literal truth, every person in Australia has to bear n greater proportion of taxation because t.lie Commonwealth Hank pays no taxes whatever. Jt is true the Commonwealth Bank has, during the ten years of its existence, made large profits: it no doubt makes fewer losses than other competing hanks, for it takes fewer risks. The extent to which in a time of stress the Hank of New Zealand fulfilled its obligations to its customers and to the country is revealed in our balancesheet of the Hist March, 1021, and we are content to rest, on the position therein disclosed. Many State industries have licon tried in various parts of the globe, and have proved disastrous financial failures.

There is, unfortunately, a growing inclination to look to the Government to start all kinds of enterprises and to regulate everything by Statute. Paternalism in Government has a malign influence on the minds and thoughts of the people; it warps the individual judgment, kills initiative, and destroys that sturdy independence and self-reliance which is necessary to build up a free and independent people. Laws which spring from this londeucv of mind clog and obstruct; they lower the. power of productivity in individuals, ami increase the cost of everything produced. They put sand in the bearings of the industrial andoconomic

machine, and they increase the cost of living enormously. Carried to an extreme, they lead to. conditions similar to those now ruling, in Russia, where a great tragedy is being enacted ; where a. whole nation is in the throes of misery, crime, disease, starvation and death ; and where, for a pittance, men and women are forced to work 12 hours a day at the point of the bayonet. It lias indeed truly been said that the least governed nation is the host governed nation. You will remember dint early in 1921. as tho result of excessive importation of goods, and of the heavy fall in tho value of many of our primary products, the Dominion was faced with a financial crisis, the severity of which could he estimated only by those responsible for the financing of this whole country’s business. There are two methods of meeting such a crisis; one is to keep interest rates low and to kind sparingly; the other is to lend freely, even up to the limit of the hank’s -resources, at the same time increasing interest rati.s so as to compel realisation of assets, and thus get hack to a normal position as quickly as possible. Wo, in common with the oilier Banks here, took the latter course, with the result that almost all the business houses in the Dominion have weathered the storm with a success that has reflected the greatest credit on the financial stability of the country. Had wo kept interest rates down.

lent sparingly, and placed money in first-class Government securities that would have yielded a high rate of interest for many years to come the Bank would have benefited, hut the country would have experienced a larreaciiing collapse. DEPOSITS AND ADVANCES. It is satisfoctorv to Lu able to tell you that we are getting nearer to a normal proportion between the- deposits and advances in the Dominion. The end of the half-year sees our current , account credit balances standing at practically the same figure as that with which it began, while there is an appreciable increase in the amount of our fixed deposits. 'I lie greater portion of that 'increase, however, ! consists mainly of sums which have been left with *us for a short period only. On the other side our advances show a decrease of about two and ahalf millions. As far as they go, the movements* in these figures are in tho right direc- ! tion, hilt, until more has Leon done to ■ restore a better relation between dej posits and advances, the necessity for ! keeping a tight hand upon our lending j business will he. evident. ; EXCHANGE. I Two years ago the exchange position j between London and Australia was exI tcnuely acute, hut by June last nor- ' malit.v was reached. Since then, however, the position has again become serious, hut, in contrast to the 1920 difficulty of transferring funds from Australasia to London, the present problem is how to transfer surplus funds from London to Australia and I New Zealand. Excess of exports over ! imports, the issue of leans in l.cnI doti by Australasian Governments and local bodies, and the realisation of a -large portion of the wool held l>v B.A.W.R.A. has swollen to undue, tii- | ineiisions. the funds handled hv the ' London offices of most of the Banks. It I is therefore extremely difficult to effect ! adjustment, in the mnmiiT customary I between the Banks, and sain; of exI change on London can now he effected I only at a very hoivy discount. I In the interests of the Dominion, it I is to lie hoped that our exports will continue to show a very substantial margin over imports. This, however, would add i-onsidurahly to the difficiil- * ties of the Banks adjusting their bnlI aiiees, unle-s the surpluses which ac- ! cumulate in London were i-ed there • to pay oil' existing accruing liabilities. I In pre-war days the difficulty could have been solved by the importation of coin from London. At present gold is at premium of 10 per cent. This j method is therefore out of the quesi tion. As far as New Zealand is-c-oncernod ; it would seem that the position might [ he met if Llie Government could see | its way to issue part of its next loan j in New Zealand instead o! obtaining ! the whole amount in London. Such a course would, to soinci extent, absorb ' these surplus credits, which are now ! available in London, hut which, as has been stated, are becoming increasingly ! difficult "to transfer to New Zealand. 1 Our trade with Australia is cxceedI inglv one-sided, and constantly leaves j a very la.rgc balance against the Dominion ; moreover! the hulk ol our I imports from the South Sea Islands ! nro paid in Australia. As a eonseI fjuonre. the soilin'" rate of fxcliango | on Australia has been doubled within ! the present year. and. at the moment, I it looks as if it may he increased still i further. nrsr.NESs conditions. Retail traders have done fairly well during the past six months, hut many wholesale houses have not yet returned to a profit-earning stage. t!i< ugh better times are in sight. Farmers are still feeling tho pinch, hut for them Loo, the outlook is improving. All classes of wool are nowcommanding increased prices, the market for lamb is exceedingly good, mutton is at a fair price, Init. beef, unfortunately, is still unreimincrative.

Dairy produce is selling at figures as high as can reasonably be looked for. Indications point to a good season in the way of production, weather conditions ovtr the greater portion of the Dominion having been favourable. The recent reductions in taxation, shipping charges and interest. afford some measure of relief to all classes of the community. The financial difficulties of individual farmers are reflected in the affairs of many of their Co-operative Companies, which haver not only become involved in heavy losses, but have also locked up large sums in advances that for some time to come cannot, he liquidation without further losses being incurred. In the interests of these companies, Parliament, last, session passed legislation empowering a majority of creditors to stop any minority attempting to force an embarrassed company into liquidation, the aim of such legislation being to minimise the. losses that the companies must inevitably sustain. While legislation of this nature may, under stress of exceptional circu.mstaiKie.s, he warranted, one must not forgot that in involves a. risk of damaging tlici credit of the Dominion. Interference by Statute with the normal conduct of business is high- ' ly dangerous, and should as far as possible bo avoided. 1 During the last ton years there has bison much wild speculation in land, and even conservative men have been 1 lu 1 into buying far greater areas than ftlieir inbaiis .warranted. Many who bought early were able to realise at a profit, but these frequently used their original capital—plus profit—to buy more land. Prices of products | soared, and land values followed suit, the best land giving to unheard of prices. In 1920-21 the value of pri- ;■ mary produce slumped, and the value olf land fell with it. j Many of our farmers are, at the pro- | sent moment, financially einharrasscc i because they bold more land than they { can profitably work. No doubt they I bought tlioso large areas ir. the hope I of selling at a profit, and they hes ; - 1

tate to make the sacrifice which the sale of the whole or part of their land involves. ; Tho only remedy for them is to cut their losses by selling , a portion of their laud, even at a. drastic reduction on its cost, keeping only as much as they can manage properly, and finance comfortably. I may say that practically all the losses sustained by the Bank during the last two years have been made on advances to farmers and farmers' organisations. Little has been lost on the advances to commercial houses and traders. L hope that shareholders will not misunderstand this statement; a loss was expeeed, and, as intimated at the Annual Meeting, the Board had determined lo assist the primary producers and to assist them even at some risk of loss. It was felt that as the Bank, which is so entirely hound up in the welfare, of New Zealand, was making good profits, some ■ of these profits might bo risked in helping

struggling settlers through a time of dire'need. Some to whom we gave assistance have gone down in the storm, hut the great majority will weather it. and ultimately sail into calm waters. The war period was an anxious time for Bankers, but it was as nothing compared with tho aftermath. "e lmvo indeed come through stormy weather, but now the clouds are breakim' and we may with confidence look forward to hotter prospects in the lu-