COMPANY PROGRESS

Otago Witness, Issue 4030, 9 June 1931, Page 61

COMPANY PROGRESS

The shrinkage which has occurred in the net profit is due more to increased expenditure than to reduced revenue. The gross profits, as brought out, are diminished by £28,168 in comparison with those of the preceding year, blit it is expenditure, in The form of taxation, that accounts for the balance of £65,760 in lowering the net profit. When the many causes contributing at present to reduce the gross profit are considered, the fact of the reduction being so small is decidedly satisfactory, as, with the exception of the preceding two years, the surplus is the highest in the bank’s history. The extent of the allowances made before the gross profits are revealed can only fie guessed, but it is unlikely that at the present time they are less than formerly. When taxation in one year increases from £121,739 to £193.682, or by approximately 60 per cent., a heavy burden is created.

The 10 per cent, dividend might have been maintained, and the appreciable sum of £61.206 left to swell reserves, but a more prudent course has been adopted. The bulk of the deficiency falls upon shareholders, whose return is reduced to 8-1 per cent.—those shareholders resident outside the Commonwealth will, in addition, have to bear the loss of being paid in Australian currency, while the allotment to reserves is unaltered. The allocation exceeds the surplus available by neatly £14,000, so that the actual amount by which reserves are strengthened—in the one case by an addition, in the other by’ a deduction—is £136.206. The steady growth of reserves continues. By their latest addition, general reserves are raised to £3.449,113. In relation to the paid-up capital, they have stood as follows: —

Although the growth of reserves has been slightly retarded, they stand more favourably to the paid-up capital than at the close of any year since 1920. During that period the capital has increased by 150 per cent.

Among the ordinary liabilities, the chief difference is the extensive reduction in bills in circulation, which have dropped to £238,062. The items of notes, interest accrued and rebates, and balances due to other banks have also more or less fallen. It is noticeable that in this balance sheet no reference is made to a miscellaneous of liabilities, all those entered having a clean-cut definition. The main item of indebtedness shows a decrease of over £2,000,000, of which interest-bearing deposits form the greater part. This reduction continues the tendency exhibited at March, 1930, but to a greater degree, being a reflection of the present financial stringency. In such circumstances it would appear that the drop of £1,843,392 in bills discounted and other advances is larger than might be expected, as it may be assumed that general advances are the chief factor in the reduction. The positions of the chief asset to the chief liability have been as follows: —

* Exclusivo of provision for bad and doubtful debts. The drop in deposits has not been sufficient to counteract that in advances. Roughly £400,000 would require to be found to meet the difference. The margin between the two has now worn thinner than ever, demonstrating how necessary it is to nourish reserves.

Chiefly owing to reduced advances the assets have diminished by some £2,600,000. Among the liquid section, investments have further fallen, but not to the same extent as in 1929-30. At £1,773,859, they are under one-third of their aggregate of two years ago, the brunt of supplying funds having evidently fallen upon them. Bills and remittances in transitu have dropped to £1,480,720, releasing some £400,000, with the £1,000,000 derived from investments, for other purposes. The cash group, at £6,453,263, has received the benefit of approximately £600,000, leaving some £BOO,OOO to meet the excess in deposits and the reduction in bills in circulation. The retention of an increased amount in the cash group appears as if demands for accommodation are not expected to lessen in the near future. Liquid assets aggregate £9,937,675, or 29 per cent. of the liabilities to outsiders, —the same proportion as at March, 1930. In spite of an annual writing down by £50,000, bank premises have further mounted to £1.217,844. The completion of the new Brisbane office may be mainly responsible for the capital outlay, but the report is silent regarding the Melbourne property which was offered for sale over a year ago. If it has been realised in the interval, it would prove a useful setoff to/ the expenditure incurred. The reduction of the branches and .agencies in Australia by 42 during the year may not affect the fixed property figure appreciably, as the premises in those cases may not have been owned by the bank. In the present depression the market values of the different properties may have altered

materially during the past 12 mon'flis, and in consequence the prudence of reserving £50,000 annually against bank premises is fully justified. With an increasing sum held in real estate (£133,816) the bank’s commitments in fixed property are not growing less, but, on the other hand, the present time may be recognised as opportune for investing money in that form. J he many factors to be considered do not render the task of control any easier.

THE BANK OF ADELAIDE.

Fai-l-up Net DirtMaicli Capital. lieserves. Profit. fiend.

£ £ £ p.e. 11)20 .. 500, COO 616.571 87.604 10 11'21 .. 625/100 042.179 88.107 10 1922 .. 025.000 672,312 02,634 10 1923 .. 875.000 749.701 94,889 10 1924 .. 875.000 778.024 116.823 10 1025 .. 873.000 807.741 117.216 10 1926 .. 875.000 824.974 104.734 10 1927 .. 1.000.000 889.827 104.644 10 1928 .. 1,250,000 1.003.464 128.637 10 1929 .. 1.250.000 1.023.875 145.410 10 1930 .. 1.250.000 1.049.482 138.107 * 9 1931 .. 1.250.000 1.053.795 91.813 7

Successive annual returns of 11.63 per ceut., .11.05 per cent., and 7.34 per cent., all with the same , amount of capital in circulation, are some indication of what tue course of banking in Australia in recent years has been. The net profit of the past year in the present case is reduced to two-thirds of that of its predc‘.:esso> and it would have seemed only equitable if the rate of dividend had been reduced proportionally. Shareholders, however, receive the great bulk of the surplus, but the fact of the dividend being paid half-yearly at the rates of 8 per cent, and 6 per cent, per annum seems to point to the chief shrinkage in the net profit having occurred during the second tlle Vandal year. A sum of f 4313.is left to strengthen reserves after the distribution has been made. No details are given regarding any iiems of expenditure. The net profit which is shown is the net amount after provision has been made for contingencies and after the deduction of expenditure. It is not improbable that, although the revenue has been considerably cut down, there are other factors to cause the reduced surplus. Charges, among which taxation occupies a prominent place, may have risen concurrently. No transfer to reserve fund has been possible on this occasion, but general reserves have been increased to the extent of the undivided surplus of £4313. Their relation to the paid-up capital stands as high as 84.30 per cent., notwithstanding the issue of £250,000 some four years aeo. Liabilities show a tendency to fall. The drop in balances due to other banks from £345.098 to £235,714 may only be an indication of the reduced turnover, while the decrease in the miscellaneous group from £125,675 to £42,771 may be another. In view, however, of larger provisions being required to meet contingencies, it would seem that bills in circulation may be responsible practically entirely for the decrease of two-thirds. Interest accrued on fixed deposits and rebates on bills d’.tcountcd at £64,938 show little change, implying that those branches of the business are not diminished in volume. Notes in circulation add merely £6661 to the indebtedness to the public. By their reduction to £5,762,326, deposits are down to their lowest total at an annual closing date for several years. It is gathered from the chairman’s speech at the recent annual meeting that this reduction does not fully reflect the restriction in trade as large sums have been placed on short-term deposit ? waiting opportunity for early employment. The restriction, it may be taken, is more fully shown in the advances, which are curtailed rather by the trade restrictions than by any extensive calling-up. The greater fall in advances has meant the release of over £430,000 for work elsewhere. The result is that advances, which at March, 1930, exceeded deposits, are now the smaller amount, and in relation to deposits approximate more closely towards their position of the preceding two years. The reduction with its consequent loss of interest would cause a part of the lowdr. balance brought out for the net profit. The relative positions of the advances group and deposits have been as follow:—

The money liberated by the greater reduction in advances has flowed into the other liquid assets, among which the largest item is Australian notes and cash with the Commonwealth Bank. At £1,038,513, it has increased over £230,000, while an additional sum of £174,137 is found in Commonwealth Treasury bills. The interest on the latter item should prove a useful adjunct to the revenue derived from other Government securities which, at £602,234, have fallen below their amount at March, 1930, but the difference may be due more to depreciation of market values than to realisation. A further interest-producing item is £170,000 placed in money at short call, which, with £2150 in municipal debentures, brings the total investments to £948,521. A definite increase is thus recorded, which, although it is in the form of shortdated investments, has an obvious advantage at the present time over those of a more permanent nature. The decline in the bills receivable group to £426,574 is another sign of the times, but the difference in specie bullion and cash standing at £45,874 while large proportionally does not make much reduction in the aggregate. Another drop is. shown in balances due from other banks (£192,710). The fixed assets, at £345,067, have slightly fallen. At the present juncture, there is not likely to be much expansion, while opportunity has doubtless been taken to add to reserves by writing down the book value of premises and furniture. The steady consolidation of the figures generally, while necessitating patience on the part of the shareholders, is the one course to lead to the improved trading conditions which, it is hoped, may not be far distant.

THE NATIONAL BANK OF AUSTRALASIA, LTD. Gross Net Mar. 31 ProHt. 1’iont. Dirldend. £ £ p.c. 1921 .. 862,102 330.610 9>,4 1922 .. 953,758 530.108 10 1923 .. 1.114.392 442.178 10 1924 .. 1.199.282 498.168 10 1925 .. 1.321.419 538.832 10 1929 .. 1.370.195 568.254 10 192" .. 1.444.329 581.645 10 1928 .. 1.54S.4S0 640,401 10 1929 .. 1.602.092 659.278 10 1930 .. 1.024.924 655.134 10 1931 .. 1.596.750 5>;i,200 8>A

Gf.-.-'ml Paid-un Mar. 31 ltc3**rvcs Cspital. Ilati.x £ £ p.c. 1321 1.376,625 2.600.000 63 S3 1322 1.661.907 2.661.125 62.45 Il-23 1.806,321 2.725,<100 66.20 1924 2.148.312 3.225.000 66.62 1925 2.414 701 4.000.009 60.07 2.532.058 4.000.000 63.32 1S27 2.664.603 4.000.000 66.11 1928 3.148.405 5.000.000 62.97 1929 3,257.773 5.000,000 65.16 1930 3.362.907 5.000.000 67.26 1931 3.449.113 5.000.000 63.98

‘Advances, Mar. 31 etc. Deposits. Ratio. £ £ p.c. 1921 .. .. 13.352.015 24,191.531 75.S6 1922 .. .. 19,605.(519 27.457,593 71.40 1923 .. .. 23.292.462 29.159,545 79.88 1924 .. .. 25,759,647 31.213,989 82.53 1925 .. .. 23.365,165 31.916,542 74.77 1920 .. .. 25.001.394 32.284,253 77.44 1927 .. .. 30.158.054 34.252,718 38.05 1923 .. .. 28.222.494 35.520.030 79.46 1929 .. .. 32.127.196 37.341,465 86.04 1930 .. .. S3.514.797 35.559.314 94.25 1931 .. .. 31.671.405 33,305.077 95.09

Advances, Marell etc. Deposits. Ratio. £ £ p.e. 1920 .. 2.S98.63G 6,3S0,05G 45.43 1921 .. 4,689.898 5.984,597 78.3G 1922 .. 3.991.579 6,545.112 60.99 1923 4.478.926 5,853.069 76.52 1924 .. 4,686.169 6,143,317 76.28 1925 .. 4,436,196 6,317,889 70.22 1926 .. 4.623.226 G.453.0S3 71.64 1927 .. 5,526,819 6.4G3.47S SI. 33 1928 .. 5,655,750 6.084.129 92.96 1929 .. 5.949.107 6,177,592 96.30 1930 .. 6,230.987 6,105.440 102.0G 1931 .. 5.454,843 5.762.326 94. CG