BANK OF NEW ZEALAND

Hokitika Guardian, 17 June 1927, Page 1

BANK OF NEW ZEALAND

WELLINGTON. .1 uni’ 17. 'Hit' annual meeting of pr;>|irift-or was hold to-day.

Mr Richard W. Gibbs, Acting Chairman of Dirot.tors, presided, and in the i oltrse tit' his address said:—l he Directors liave pleasure in submitting the Report and Balance-sheet, with Profit and Loss Statement, tor the year ended 31st March, 1927.

The figures call lor a short notice and comparison. under 'tiho various heads, with the previous balance-siioel.

Capital and Reserve Bund.—These combined show an increase ot £(521,887. representing amount ol (alls pa d up on the C. and I). Long-term Mortgage Shares and the amount placed to reserve last year. The amount standing against the 0. and I), slimes includes instalments paid by shareholders in advance, l-'rom this year s profits it is proposed to translcr .£200.000 to the Reserve Fund, bringing it up to £3.025,000. Profit and Loss.— Although the profit for the year, exclusive ol that on investments realised or matured, shows a reduction of £05.000 as compared with the figures for the previous vear. the actual earnings ol the Bank were not £3.000 less, the difference being accounted for mainly o larger recovery of bad and doubtful debts in the previous year.

Deposits.— These show a reduction of less than £1.157.201, which naturally affects the earning power ol the Bank.

Note circulation. —This shows a shrinkage of 0078.700 an indication of leaner times. The increase in '-he previous year was to some extent duo to the Faster expenditure, which did not affect the position on this oecas-

Moncy at Call and Short Notice— This item shows a reduction ot £L808‘MS the amount tints temporariß invested being now utilised in other directions.

Government and Sundry Set unties— The total of the three headings settling out these figures shows a reduction of close upon a million. son will note that the first nine items on Die Assets side of the Balance-sheet, representing the Bank's liquid resourees amount to £22,+82.008. compared with £0.5 060 358 of twelve months ago. ne position remains a strong one. but not unnecessarily so m view '• “ still unsettled state of the M'

Bills Discounted and Advanced. These together total C‘23.92-I.9iff. »s ■iwainst £22.602.000 as last shown. . not inconsiderable in; tease. which coupled with the fall m deposits £1,157,20+. represents an • movement of £2,i19.5-L. r.andcd Porperty. Premises. Jfte These stand at £o2'.bS,,. as , £481,103 twelve months agoour increasing business, it "> readilv understood that promises wWh ten or twenty years ago .net requ>mments now no hmgei do sv ’ building at some pmuts and en merits at others account tor the >ea -

Dividend— The dividend, which J he payable at Wellington t„-mo. ow - m ,l at branches on reieipt ol adttet. D at the old rate. viz.. 1-s +d on the ordinary shares. Ihe possi hility of a 1 per vet bonus tor the vear being forthcoming was lore<b.u - owed ill a previous report, and I - nl -i-cd to siv our earnings wan ant hi V and the mildest amount, reprei r„r every 25 of capital, will be distributed with the 'Evuleud. Tim dividend on the Long-term Mo.tfflge Shares will also be payable toBoard of Directors. The two Director* to retire in March last wore Sir Harold Beauchamp and M< 1 Nicholson: both were reappointed b> the Governcent. Sir George Flint was re-elected Chairman lor the <-i----suitig year. He left tor a trip to the Old Country in April last, ant colleagues did me the honour of appointing me Acting-Chairman during his absence. , The personnel of the London Don,cl i, the same as a year ago. and we have again to express our appreciation ot their care and vigilance in attending *o our business in the world’s metropolis.

World Condilions.—While conditions generally may be considered on the whole to have improved, they still give, rise to much uncertainty as to the future and necessitate conducting our finance on a strong basis. Ihe effects on finance and trade of the prodigious payments to America by Britain and the Continent by way of principal and interest on their War llubls have not yet Ijcc-ll i'ully realised, but the situation opens up some large problems which are already causing concern on both sides of the Atlantic.

I shall now deal shortly with a few of the more important matters in the financial and commercial world nearer home. On the trend of the markets for mir chief products we have had cause tor considerable uneasiness.

Dairy Produce.—Dairy produce lor n time showed a serious decline, though happily the latest reports register a

satisfactory recovery, qiiotai ions for butter being up to 170 s per c'.vt. as against 17 Is last year, and cheese 87s to 9+s per ewt, as against (His.

The market appears steady at about these figures, and it is relreshiug lo learn from a recent report of Die Director of the Dairy Division that there has been an increase in liutter-lat production of ff.ll per cent lor nine months to a recent date, as compared with the same period of the 1920-26

Wool.—The wool situation presents somewhat brighter picture'. The London March series of wool sales closed firm for all kinds of wool, with good competition from the Continental and Home trades. Prices showed an all-round appreciation compared with values ruling at the January series.

Frozen Meat.---In common with all other trades, frozen meat had to hear its share of the depression caused by the coal dispute, and. owing to the great increase in unemployment, the demand for meat was greatly reduced. This naturally had an adverse effect upon prices.

Frozen beef continues to have a keen competitor in the Argentine, which has secured the British Army contract for tinned beef which last year was placed in Australia. WHEAT. Wheat production in New Zealand this season has been above the average, and the harvest lias been galhcied under ideal conditions. About 229,999 acres were under crop, the total return being estimated at approximately 7.000.000 bushels.

Public Borrowing.—For public works of various kinds the- Government has recently gone on the London market fo r Die New Zealand Government has recently gone oil the London market foi :i 5 per cent loan of £0.000,000 at 299 10s, which was particularly well received. the whole amount being promptly subscribed, giving a net return to investors of £5 0s 10(1. Ihe successful flotation is a tribute to the high credit enjoyed by the Dominion on the London market.

Economic Position. —AVith a reduction of approximately £10.000.000 in last year’s income to 31st Decembei. and with an excess of imports over exports of approximately two and a-liali millions, the necessity lor curtailing expenditure is obvious, as there is a limit to the country’s resources; but if the gravity of existing conditions is reemmiseil by all. from the Government downwards, and a determination made to live within our means, though it may mean sacrifice. I have no fear for the future, which I look iorward to with confidence. Bates of Interest. —The reduction of the Bank of England rate has had a wholesome effect on the London market and Colonial Securities promptly appreciated. Unfortunately, with our adverse trade balance to contend with, this reduction has not been reflected in New Zealand, and an increase m local rates, long deferred, became inevitable. The banking figures for the past quarter. as compared with those ol a year ago. show a shrinkage in deposits of no less than £’1.773,667, whilst advances increased by £2.310.t568. representing an adverse movement by £4.289.333. To meet tbe situation it lias been found necessary to offer moie attractive terms for long-dated fixed deposits, with the usual corresponding increase of i per cent on advances.

This increase in the minimum rate of interest on advances, consequent on a similar increase in the rate paid by the hanks on fixed deposits, has aroused much adverse criticism. The increased rate does not apply to all advances; most account s which have hitherto been cliarg* ed more than (if per cent will not tic affected. The increase was not decided on without the fullest consideration by the banks and with a lull sense of responsibility. Between 1915 and 1926 deposits with the Joint Stock Banks increased by i‘ls.oßo,ooft, whilst the deposits of the Post Office Savings Bank increased by £25,7-15,000.

It. is safe to say that the amount ot individual deposits in excess of Cl,ooo held by the Post Office Savings Bank in the Dominion runs into millions. If these deposits, in excess of Cl,ooo, were in the hands of the Joint Stock Banks, the recent increase in rates would not have been forced upon them. It is also erroneously alleged that the six Joint Stock Banks doing business in the Dominion have a monopoly. The Savings Bank as well as every other institution, Joint Stock Company. or person that borrows and lends money between themselves is a competitor of the Joint Stock Banks. Further, I here is nothing to prevent now banks being formed, provided the Banking Laws of the Dominion arc complied with.

When the New Zealand Government receives linin us to-morrow the dividend on its shares in the Bank, it will have received in all for the year:— I nenme Tax Cl 60,418 Land Tax 1 1 ,370 Note Tax 119.930 License ... 209

£297,918 Dividend £232,128 Total £530.046 In discussing Die rise in advance rates, reference has been made to the simultaneous fall in the Bank ol England rate. As was explained some time ago from this chair, there is little co-relation between the two rates. The Bank of England rate is the best rate for the discount of gilt-edged commercial paper, Die discount being deducted from the proceeds when tile hills are discounted, and forms a class of business unknown in the Dominion. The New Zealand advance rate is for overdrafts, and is an entirely different category, the charge being made on the fluctuating daily balance and debited twice in the year, the security being ot a less liquid and of an entirely different nature from that held by the Bank of England.

While recognising the necessity ol maintaining a strong position and oxcicising caution, we shall do our best to meet all legitimate requirements of our customers, as we bare been able to do in Die past.

Long-Term Mortgage Department. A’ou will naturally want to know how this Department is progressing. There was necessarily some delay in settling the details, and we were not prepared to consider applications until early in Die year. Since then numerous ap-’ plications have been received, many ol I them unfortunately outside the range j of safety, and these have had to be declined. The figures in the Balance Sheet will, however, show that a satisfactorv commencement ha- been made, ami from inquiries coming to band we bate reason to consider that Die inauguration of the scheme, was justified and will prove successful. Since our hooks were clo.-ed at 31st March, further loans in this Department have been approved for £’(>B.6oo. Farm Properties.— I There lias been a slight improvement in the demand for country lands, and many properties in the hands of mortgagees can now be bought at a reasonable value. | can claim an intimate knowledge of our staff, having joined as a hoy. and having been your servant in one capacity or another Tor fifty years, and t am satisfied that a more loyal and contented body of men generally, it would be hard to find. Our men are well paid and cared for. and are always sympathetically treated: they know this and acknowledge it and it will require better argument than given to disgruntle them. AVe have no such thing as patronage

in the service, and it is open to any man. liv efficiency, hard work, and tact to rise by his own merits to the top. The thanks of the shareholders are due to our very capable General Manager, whose entire energy is spent in their interests, and to the loyal and capable body of men under his control.

I now have pleasure in moving the adoption of the Report and Balance Sheet.

Air William Reece, seconded the adoption of the Report and Balance Sheet.

The Chairman has, I think, so tally and ahlv presented the chief points of interest in the year’s work that there remains little to be said, and there is only one matter to which 1 will refer. 1 have now boon a Director of the Bank for many years, and have had full opportunity of seeing what has been the Bank’s policy and practice in the mailer of loans against farming securities, and I have no hesitation in saying that every application which has come before the Bank has been dealt with upon its merits, and that, during the difficult period through which we arc passing, no farmer applicant, has hoi'ii refused an advance il lie was in a position to give the Bank satisfactory security. There have no doubt been cases where the Bank’s idea ot satisfactory security has differed very materially from that of the applicant. Our criterion lias been that of productive capacity of the land, and, in valuing securities offered to us, we look mainly at that factor and estimate the value for security purposes upon the return which the land has produced over a series of normal years. Were we to adopt any other basis of valuation, we should be running risks which we could not justify.