BANK OF NEW ZEALAND

Hokitika Guardian, 14 December 1923, Page 4

BANK OF NEW ZEALAND

WELLINGTON, Dec. 11. Tito half-yearly general meeting was hold to-day at the Head Office of the IJanlc of New Zealand, Hamilton Quay. Welington. Sir George Elliott (Chairliiii liof Directors) presiding. The Chairman said : ( deeply regret to record the death of Mr K .Vi'. Kane, who has been a member of the Hoard of Directors ior the past nine years—first as si Government nominee, and afterwards as a shareholders’ representative. Mr Kano had a wide knowledge of the Hank's affairs and look the keenest interest in everything that affected the Institution. Ilis valuable services will he a distinct loss to the Hank of New Zealand. 1 am sine you will join with ns in the sympathy we feel for Mrs Kano and the members of her family in the irreparable loss they have sustained.''

As most of you are aware, our hallyear It meetings held every December are more or 10-s ol a formal eharaeter. The only actual business to be

transacted on this occasion is the election of a shareholders’ representative to the Hoard, and the declaration of an interim dividend. Ihe reiiring Director. Mr William Watson, again offers: Ids services, and as there is no other candidate for the position, J have much pleasure in doelnting him dulv elected.

I am glad to say that the half-year's operations fully warrant the declaration of an Interim Dividend at a rate similar to that paid a year ago. ’I he amount to he distributed i.e -An interim dividend of Is Id per share on the Ordinary Shares, which will absorb CloO.OlKl. A dividend for the year to 31 si. March next on the I’leteionee “ \.'* Shares held by the Government. £.10.(00. And all interim dividend on the Preference ,: H." Shares held bv the Government. £2I.COD. A total distribution of £221.000.

The dividend will he payable in Wellington to-morrow and at branches on receipt of advice. The issue of' £ 1.1:21.00'.) ol additional capital announced at our Annual Meeting in June has been duly made and CI.III. 100 of the amount paid up at .‘fot.li. November last.

Early in the New Near all the now shares not taken up. as well as the fractional shares pertaining to the Issue. will be offered to shareholders lor purchase bv tender. In terms of out Deed of Settlement, any premium on these shares must lie credited to the Reserve Fund. The allotment of these shares will he made to the highest tenderers either in full or. as circum-

stances may require, as nearly as mat he. pro rata, subject to payment in cash in full of the amount offered. Shares so allotted will rank lor proportionate dividend in respect of capital paid 11 ]> thereon as from the ‘••to March. 1921.

The whole of the fractions amount to 1,21" shares—a relatively small proportion of the 710,000 distributed. Since I last addressed you. financial conditions in the Dominion have shown some improvement. though there is still much leeway to ho made up. The weather during the winter and early spring was most iintavoiirlmle. hut the last two months have been uiw It hotter, anti there is, at the uimnei't. every prospect, of a large output of produce. Prices ol staple products are cjuile satisfactory, and those primary producers who purchased their laud at fair prices, and who are not overburdened with debt, should do reasonably well. Owing to competition Iron) oversea,, manv ol our secondary iudustiics no ■ uinewhat im lined to languish. Uid\ by increased efficiency, and by 'he adoption, ol the latest methods in working, will our manufacturers ho able to cope successfuly with the Hood ol inij'vit inti'Jiiz The largo volume of impotU dur- ■, p.-- twelve month's i.. causing some concern and. notwithstanding the |e,snn importers had in 1921-22. there is said to he considerable overstocking. Articles of luxury, especially, have been imported to an extent that raises misgivings amongst those who recognise the necessity for strict economy in both public and private e\-

pemliture. Monetary conditions in London won' until a few weeks hack murli about the same as they were six months ago. The disturbing influence of the general eleetion lias, however. brought about a Call in the value el' gilt-edged stocks, and two important recent issues of New Zealand Local Rady Debentures won 1 unfavourably received by the British public. In Australia, rates have hardened, several of the State Governments paying h! free of State and federal Income Tax. for ten-year Linns. Hank overdraft rates there are practically the same as those in Now Zealand. In the Dominion, there is no shortage of funds lor desirable investments. In the North Island, where a greater demand for niiioey exists, rates lor first class .Mortgages are from (i to ill per cent., while in the South Island the ruling rate is ti per cent. Local bodies are in some instances paying of per cent, for loan issues, but in most cases bI per cent, is paid. and even at the latter figure large investors are not buying freely. The increased income Tax on debenture issues has undoubtedly alfected these loans; •If.'., war loan stock, tree of income lax, at present market prices gives a better return to most investors. The State Advances Department lias been inundated with applications for loans, the reason being found in the exceedingly liberal conditions provided by the legislation passed last session. To some extent, these advances have been applied for to clear off existing charges and thus a certain amount of money for investment i: other channels is being freed. Tn view of our increased Capital, aplieatioiis to the Bank lor advances are being encouraged, and no desirable business of a proper banking character has been declined. The exchange position between the Dominion and London and the Dominion and Australia is still most unsatisfactory. With the large surplus of exports over imports between New Zealand and the Mother Country, and a reverse position as far as Australia is concerned, the present rates of exchange are causing much dissatiofactiii amongst exporters to Croat Britain and amongst importers from Australia. It is asserted in various quarters that the high buying rates of exchange have been brought about by Banks combining and forcing the rate to a high level with the object of making large protits. Afav I say emphatically that this is not the ease; high exchange rates, either buying or eslling, are not m the best interests of banking institutions. High rates cause the greatest dissatisfaction; they penalise business; they build barriers and dam that tree (low of finance which keeps the wheels of industry revolving. For instance, at the present moment, the cost- of telegraphic transfers trom London to New Zealand is H per cent. I repeat that it would he more >a-

tisfactory for Banks to work on a narrower margin of exchange rates, provided money or credits—which are the same thing—could be advantageously moved from and to London and New Zealand, than to have a wider margin with large balances marooned in London and earning a low rate of interest.

ft may he asked:—lf a high rate of exchange against New Zealand exporters does not pay the Hanks, then whom does it pay P May I suggest that the fact that Bankers arc compelled by force of circumstances over which they have no control to accumulate large sums in London, the rate of interest on these securities in which such funds are usually invested, must be affected. If then, interest rates are reduced to some extent—then it follows that borrowers of short-dated loans in London are reaping where they have not sown. In the second place the New Zealand importer also benefits. hi 1921-22 when the present position was completely reversed and New Zealand imports were greater than its exports, the importer was paying np to H per cent, premium for telegraphic transfers; to-day he is buying at a discount.

Thus, while the exporter i- blaming the Hanks, one sees the borrower in London of short-dated loans, and the importer in Now Zealand benefiting by the existing circumstances. While existing conditions with regard to the balance of trade and the

lirium tan lie restored only liy the | Coinmnwealth and Dominion (hivemmi'iits raisins the whole or a pm ; ion of their Loan requirements in Australia and Xew Zealand instead of in London. Xew Zealand ira.de operations tor I the 1 htll season resulted in the tie- j eiimiilation of larso halanees ;it our | London Olliee ; and the .season recent- | ly ended, with its la rep surplus of j

exports over imports, coming on top of the previous excess lias added to the difficulties of adjusting our London balances. The position has also been substantially intensified by the raising of the Government Loan of five million in London in April last. Had that Loan been issued in the Dominion or in Australia, the Inlying rate on London would have required to purchase from us something like live millions of exchange on Louden m order to meet the Dominion's dis-

bursements which include payment interest, and purchases of material i Public Works, Railways, etc.

The raising of Government Loans in New Zealand instead of in London would solve the exchange problem for this country, hut it must he remembered that the raising of loans locally would he more expensive, and funds that might otherwise he available for local enterprises would he absorbed, while inferest rates generally would would certainly harden.

it is a (|ttostinii for the Government fo consider, whether, ns long as the balance of trade continues >o largely in the Dominion's favour, it might not he advisable to borrow locally and so absorb these surplus funds in London. and. at the same time, t-edme the Inlying rate of exchange considerably—what was lost in interest would he gained in exchange. In any case the country cannot have it both ways. If New Zealand did borrow locally it would probably have to pay the same rates as New South W ales and \ ictoria are paving tor the Loans they are raising in their, oun territory. At presold these Australian rates of interest on Government Loans are of per edit, and are free of all taxation. The Exchange conditions between America and London and the (ontmcul ami London arc not comparable with those existing between Australasia and London. The ' Australasian system has answered well over a king period, and it '.'.ill continue to do o v, fi.-v, condition.., become norm d. As the subject of exchange luis lor a considerable period been much in the public mind, I have ventured io take up your time in an endeavour io

explain some of tho intricacies of an undoubtedly difficult subject. New Zealand is settling down io Hie even tenor of her way, and the difficulties of both the farming and the business conunumnes, should, in the long run, have a salutary (fleet. fit conclusion —two great dtshncltivo farts stand nut-one is this:—l he farmer who refrained from land speculation came through the time of Repression with comparative ease. I!w other is this: —The individuals, linns or companies, who wisely carried steadjjv on, ivtYiiininp: froiii l ‘ u ‘ iomptiiiion p, take money on deposit at call lor tffie •extension and development of (.i,,.;,- businesses, were (ho individuals, firms and companies that most successfully weathered the financial storm.