WELLINGTON NOTES

Hokitika Guardian, 22 September 1924, Page 1

WELLINGTON NOTES

RANKERS AND RANKING. (Special to “Guardian”.) WELLINGTON, Sep. 10. liankinp alfairs and hankers have been hrouplit rather prominently before the people since the session opened, for cpiite a number of members of Parliament have indulped in critic-ism of the hanks. One member supposted that the increased profit of lilo,()()() shown In the National Rank of New Zealand was the result of the remission of taxation, while another member stated that hank profits were something enormous and ouirapeous. Needless to say that these remarks emanated from Labour members of Parliament. That these critics are blissfully ipnorant of tin* principles of bankinp poes without saying, for if they knew more they would have said less. It lias been a traditional policy of hanks to remain silent under criticism, and to abstain from “ writinp to the papers,” hut the criticisms which have been levelled at the National Rank have been too much for the peneral manaper of that institution, and in an interview with a newspaper reporter he castigates the critics very severely. The increased profit of L'l3,(ll!(l was earned during the year ended .March 31*-t, Iflil, and was clue to the fact that the* hank had the u-e for Ib.c* full period of the additional c-apilal of “loll,(Hill obtained by the issue in dune, 1922. of l(l!),(li)(l new shares of CI Ills each of w hich C2 represented premium. The minimum overdraft rate of the hanks is IP per cent and if this was earned oil the additional capital that would have made L‘29,230. It would have keen very surprisinp indeed, if, with additional capital of nearly half a million storliup, the bank did not earn a larpe profit. It would have been a very unfortunate thiup for the Dominical for it would have indicated a sorry state of affairs in the country. To suppest that the increased profit was due to the remission of taxation was not merely unfair, hut was stupid. Labour members have pot the idea that (hoy are very clever economists ami know all about bankinp and liannnee. They helonp to the “you can’t tell me" tribe. It was pointed out by the peneral manaper that the income tax paid in New Zealand by the National Rank during the year amounted to 22! ,!)(>() loss than in the previous year owmp to the reduction of taxation, and the hank’s avernpo overdraft rate wets reduced by more than one half of one per cent, which cm the avernpc overdrafts for the year amounted to more than 2 10,000. Furthermore over the same year stall' salaries. allowances and annual bonus increased by LI.'I,(ItHI. THE ENORMOUS 1)1 A'II)ENDS.

With respect Ln the larpe dividends it is pointed out that the hank paid 111 per cent dividend and per cent bonus or a total of II per cent for the year on the paid up capital; hat the critics overlooked the* fact that 22,- ! : 33.(HM) of .shareholder**' funds were* employed in the business, and divid ends paid only oil L"1,231>,1N)t) of paid up capital. The dividend distribution if spread over the whole amount of the capital employed is only e<|ual lo a little more than Ii nor cent. Sound liankinp policy required lie* ercalnni and inainteliauee of a substantial reserve*. and nlmo't invariable of a secret reserve* I mid. Every bank aims f become strotip ami llterelnre sale to the community. "As salu as the Hank' of Enplaiid” is not an uncommon sayinp and it is significant. New Zealand wants strotip hanks and no others. Fortunately for us the six hanks ope rati up in New Zealand are solid, hut that appears to lie a crime necordinp to some members of Parliament. The reserve fund of tin* National Hank has been built uu out of premiums paid, by shareholders, cm new shares, and the balance has come out ol profits withheld from distribution in order to strenptlien the resources of the hank. Those who know the enormous strain pat upon our banks duriap tin* slump of 1920-21. and how they stood up to it will always ho thanklul that the banks were slrnnp enouph to lace the situation. GOVERNMENT AND RANK. The announcement that the Hank ol New Zealand was lo lend the Government ’21,123.0(10 at o', per cent in linVnee farmers allected by the moratorium came as a surprise for the fuels were well guarded. Investors ill stock cxehunpe securities suspected somethi up, but were unable to forecast what was pendinp. liaise who hoiipht Rank of New Zealand shares overnipht found themselves the next day richer by the extent of os per share. I lie share-holders are not eoinplicini lip at the* new issue of shares, hut there are others wonderinp to what extent political pressure was hrouplit to hoar on the hank to find this money. R was stated some weeks apo that the New Zealand Government was issuinp Treasury Pills in London for a million and a half ami Mr Massey staled that the Rills would ho repaid out of the loan to he issued in April next. Apparently these hills were lint issued and the Rank of New Zealand was forced into finding the money. This loan which is at o', per cent upsets the Government’s policy ot poppinp clown the interest rate to 5 per edit. Morlpapors must now pay ot per cent <>i> loans from the State and local bodies will also sufier.