WELLINGTON NEWT

Hokitika Guardian, 5 July 1926, Page 3

WELLINGTON NEWT

RURAL CREDITS. (Special to “ Guardian.”) WELLINGTON, July 2. Tt seems that schemes arc being devised in various parts of the Empiie with the object of prevising ample credits at relatively cheap rates for farmers. In Sbuth Africa it is proposed that a, Central Board of the Land Bank should divide the country into agricultural loan districts or

areas. In each of these areas an Agricultural Loan Society will he created. These loan societies will be branches of the Land Bank, and they will have practical farmers as their directors. The capital of the loan societies is to he raised by public subscriptions, and it is intended that no society shall come into existence until its subscribed capital has .reached £5,000. The objects of these loan societies is to make advances to its members against- theii crops or other securities. The Canadian Government with the object of initiating a system of rural credits propones to create a Canadian Farm Loan Bank. It i.s proposed to provide for financial, assistance for purchases of land and seeds, live stock, implements' and equipment upon the security of first, mortgages. Loans are to be confined to farmers and are not to exceed £2OOO in any one case. The Dominion Government is to provide the initial capital for the Board to an amount not to exceed £1,000,000, of which £200,000 is to ho cash. This will L? the foundation of a Land Bank. The subsequent- stock will he -provided by subscription as follows: —The Dominion Government is to subscribe for 5 per cent, of the loans of Provincial Governments and also the same percentage for all loans within the boundaries and* each borrower will he compelled to take out stock to the value of 5 per cent, of his loan. Tt will he noted that the capital in both cases will he small, at most, in the case

Canada, the capital is a million sterling. Apparently this i.s considered sufficient. Thg long term loan proposals of the Bank of New Zealand involve a capital of £5,625,900. It is a wonder that any large institution would venture into such business after the stupid and unfair references to the Bank of New Zealand in Parliament, The Bank is endeavouring to meet a situation - and is doing so at a suggestion broadcasted hv the Government to all institutions. One would imagine that by offering to carry on the business the Bank i.s trying to work a point. It cannot engage in the long term loan business without tin? consent- of Parliament. That surely ought to he sufficient. PREFERENCE IN SHARES.

Investors in New Zealand show a very strong Dreferenee for bank shares, and when this i.s examined there is ample reason for it. The prices for bank shares are now very high and the interest in. return on the prices quoted is very small. Taking some recent quotations it is seen tllet the Bank of Australasia shares at £l4 4s (they are now quoted at £l4 8s) give a return of £4 11s 6d per cent ; National Hulk of New Zealand shares at £7. return £5 per cent; Bank of New Zealand! shares at £3 2s 6d give £1 4s lid per cent; Bank of New South Wales at £45 os give £4 8s 3d per. cent; and Union Bank shares nt £ls os yield £4 lSs 3d per cent. Small though these returns they are infinitely better than what can be obtained from mortgages or even local bodies’ debentures. The dividend / on bank shlares is net, for the Bank pays a very

stiff income tax caluclated in a peculiar way. With a mortgage at say 6} per cent there would be heavy income tax mid always the risk of non-payment of the interest. With bank shares the interest is payable half yearly and there is never any doubt about tlie dividend warrants being posted. It will be noted that the return on Bank of New Zealand ordinary shares is only £4 4s lid per cent. That arises from the fact that there is a probability of a new issue of shares being made in connection with the long-term loan proposals.. The price of the shares anticipates this Issue.