Bank of New Zealand.

Taihape Daily Times, Volume XII, Issue 3649, 10 December 1920, Page 4

Bank of New Zealand.

HALF-YEARLY MEETING. WELLINGTON, This Dr. 3'. At the Half-year General Meeting, held this morning, Mr Harold Beauchamp, Chairman of Directors, stud; As you are aware, the only formal business at this meeting is the declaration of an Interim Dividend and the' election of a Bh arch old? vs’ Director. * INTERIM DIVIDEND. The profits for the half-year ended 30th September were' again satisfactory, .and the Board feel justified 1 in declaring an, interim" dividend of 1 82 per cent. This will b’e payable at Wellington to-morrow, and at Branches on receipt of advice. BOARD OF DIRECTORS. The retiring Director on this occasion is Mr William Watson, wnose term will expire on 31st March next. He has given notice' of his ■ intention to seek re-election; and as there is no other candidate, his election follows as a matter of course. It gives me much pleasure to now declare him duly elected.

BANK OF. NEW ZEALAND ACT, 1920. You will doubtless regard as the piost important portion of the Act the sections which deal with the Capital and Reserve Fund. These provide that, of the amount nowstanding at the credit of the Reserve Fund »(£2,500,000), £1,125,000 is to bo transferred to Capital Account, 'phis is to be allocated to "the Government and the Ordinary Shareholders in the same proportions as those which their present holdings bear to the whole Capital <ff the Bank. The Government, which at present owns one-third of the Paidup Capital, —•“A” Shares £500,000: “BV Shares £250,000 —is to, have its holding increased by £375,000 ia “B’ ’ Shares. The Ordinary Shareholders, whoge capital is now £l,500,000, will have £750,000 of the Reserve allotted to them.

As to the dividends which may be paid in future it is provided ia the first place that the “A“ Shares are fo receive a fixed, but not cumulative, dividend of 1 per cent. —the sgme aa .the present maximum dividend upon that class of shares and, it may be added, the dividend which has been paid on them for ten years' past.

If the profits of the Bank are on such a scale as to allow of a larger sum than being distributed in any year, it is provided that onethird of the aditional amount distributed shall be paid to the holders o£ the “B” Shares —the Government, and two-third-s of the Ordinary Shareholders. EXCHANGE Many of you are aware that, during the last few months, many importers in these Dominions, and other persons who wished do remit money to London, have had an unusual exqxperience, as they have met with, difficulty in obtaining the drafts which they needed to make their payments, although they possessed abundant money for the purpose. The

causes of this are not far to seek. They are written with the utmost plainness in the trade figures which i shall quote later. We have had to

pay out in London many millions more than we have been providing there. , In addition to this, adverse . trace balance which has had to be met out of funds which had accumulated in London up to the end of last year, several large payments have recently had to he made in London on Australian account; and the result has ■been that the resource® available there have been so fully drawn upon that most of the Banks have had to I place great restriction upon theTr operations in the sale of London exchange by telegraph or by drafts at short currencies, or—what amounts to the same thing—.the purchases which' they were willing to make in London, of Bills upon the Colonies. * This 1 is the explanation of the difficulty which many traders have been experiencing in making remittances to Britain, or * elsewhere abroad, to meet the liabilities which they had incurred in those distant places. I am pleased to isay that the resources of the Bank of New Zealand have proved sufficient for all the requirements of its customers in this r direction. GENERAL REMARKS. New Zealand, as is generally known, ’ enjoyed a wonderful prosperity during the war period, owing mainly to the I raquisition of the principal primary products of the country by the imperial Government. Cash was paid 1 for the produce on delivery Into store, ! the Imperial Authorities assuming all the risks of storage, fire insurance, etc. The total amount actually paid by the Imperial Supplies Department from the commencement of the commandeer until the 31st October. 1920, was £.147,508,293, made up as • foI :

- % £ Frozen Meat .. 51,687,230 Cheese .. 2J,144,51.r Butter .. 8,233,04^ Butter, Equalisation Funds 944,461 Scheeiite .. 178,451 Wool .. 51,118,71* Wool Profits Distribution 727,.542 Freezing Co’s. SlipC Wool 7,742,761 Sheepskins .. 3,225,562 Hides 740,362 .. 968,952 Other Business (non -Imperial) Other business (non-imp.) 1,138,67? £147,850,67?

This huge Sum had a fertilizing effect on business, on trade, and on prices generally, but it was nor wholly responsible for the war prosperity. The New Zealand Government borrowed £80,089,025 for war purposes and most of thi.? money wasobtained and spent _ locally. A very great change in the economic conditions has developed .within the past few months, and the outlook generally' is not so favourable as it was. There is an increasing demand for loans on the part of the Government, also by many local bodies and large joint, stock companies. The Government issued a £2,000,000 loan for Public Works in April last, and the interest rate \vas 5 per cent subject" to income tax. There is now being offered to the public a 5J per cent, loan of £6.000,000. This loan, which is also subject to incoroe tax, is intended to provide for the repatriation of soldiers and subscriptions to it arc compulsory on the part of those who pay land and Income tax. Local bodies have obtained authority to borrow in the aggregate, about £6,000,000, and such of them as managed to appeal to the market early in the year, secured their loans: the majority of them have, so far, not been able to arrange their Inances. .There are prob- • ably two reasons for this: (1) that the rate of interest is lower than most •> investors now exepect to receive, an(f----(2) the average investor is overloaded with such securities. This difficulty on the part of local bodies in raising money may-"not be without if 9 advantages, for -it must be obvious that many of them were influenced by a desire to carry out too ambitious programmes in respect to municipal enterprises. A great -modification in the views of those in control of boroughs, county councils, etc., must result from this difficulty in borrowing. ThTS, however, may prove a blessing in disguise, for when money is again available at a more moderate rate of interest, industrial conditions maythen be more favourable, and the projected public undertakings' will in that case cost much less than they would" if put in hand now.?

The banking averages for the pash quarter gave striking evidence that ft change had commenced. This wa» shown by the very -substantial increase in the advances and discounts, a® exhibited in the following table; Sept, 1919. Sept. 1920. m £ £ Advances .. 28,785,870 37,191,941 Discounts .. 1,363,903 1,825.867 30,149,773 39,017,808 There was also an increase in thetwo classes 1 of deposits, which show: - Sept. 1919. Sept. 1920. £ £ Free Deposits 30,331,517 36,486,999 Fixed Deposits 15,041,568 16,644,694 45,372,'885 53,131.693 The increase in the deposits is considerably less than the expansion of the advances, and it is doubtful whether the deposits have been increase# by fresh, income.

The mortgages registered, and disi charged in the Dominion also furnish indications of the changed conditions* For the twelve months ended September 30th the figures axe: Year to September 30th, 1919, Mortgages Registered. £29,924,312; Year to September 30, 1920 £65,947,629. Mortgages Discharge£> £15,978,291; £30,541,820,. Amount Advanced. £14,846,021; £35,405,809.. The excess of mortgages registered over mortgages discharged in the past twelve months is considerably more than double that of the previous year and is In some measure} cuo to the mortgages registered in connection with the Government’s arrangements for placing dischargeor soldiers on the land, and partly to the generally inflated values of urban, sunurban and rural land.

THE WOOL OUTLOOK. During the first three or four * months of the current year the wool outlook was satisfactory, but in May there was a sudden change. At thq sales at Antwerp, held on May 21st^ T 125,000 bales of Colonial wool were offered and prices declined from 10 to 15 per cent. About the same time 18,569 bales —mostlyomerinos and other - fine grades—were offered in Kcw Vork on behalf of the British Government, and prices suffered a decline - of from 10 to 20 per cent. Since - these sales the market has been depressed, and while fine wools are Jn

demand at reasonable price, medium and coarse crossbreds have slumped appreciably., ray of hope visible at'present? in poverty-stricken Europe, chief among the countries being Germany. But Europe, unfortunately, has not the cash or credit to pay for wool, and it would appear desirable that New Zealand should adopt some scheme of extending to Continental buyers of wool long credits. The Argentine scheme is designed to give foreign buyers two years in which to pay for, their purchases of wool, and New Zealand might find it advantageous to arrange similar terms. In any case it must be evident that nothing like the ''prices obtained under the British commandeer can he expected for this country’s ffee wool. In the twelve months ended September 30th last 165,821,5081b© of wool valued at £12,351,396 were .exported from New Zealand. For a similar weight op wool now we should get probably about £7,000.000. and a good deal OP that money will be owing to the country for some time, especially if sales are made to foreigners on long term credits. To assist growers who desire to hold their wool, the Government has obtained authority to guarantee ( advances, and it is probable tbat many will take advantage of this privilege. If so, that will mean the creation of a considerable additional amount or banking credit,' which will be locked up in comparatively, long-term investment. Such advances would naturally tend to curtail credit in other directions.

• • FROZEN MEAT*. , With the exception of lamb antf light-weight mutton, the market For this product is in a similar position To wool. DAIRY PRODUCE, BTC. It is, I am sure, a matter for much congratulation that the butter output of the Dominion, available for export up to 31st March next, has been bought by the Imperial Government at 280/ per cwt:, the highest price ever realised for this product. Payfrnent for butter will be made 14 days after it has been passed by the Government grade** : New season’s cheese, a short time, ago,was in Strong demand, but serious industrial troubles in Great , Britain,’ bringing in their train a large amount of unemployment, have had a very depressing effect on the. market and vajues have fallen substantially. If there be no recovery in price, it, is most probable that many of the dairy factories equipped with dual plants will at once commence to make butter instead of cheese. I believe I am warranted in assuming that the exports of dairy produce .for the present season will realise something in the neighbourhood of £12,000,000, which would far exceed the result obtained in any previous year.

Tallow, hides, pelts sheepskins, rabbitskins hemp have. all dropped in value, and the outlook appears to be for a further decline. Thus It ..must be apparent that the income of Dominion will be less than It Has been, and the spending power of the community must contract. Money is at present dearer in Australia, London and New York than if is in New Zealand, so if the country's' produce is entitled to* be sold at the world’s parity of value, it surely follows that those who have credit to sell will also expect to receive the world's parity. France, Switzerland and Sweden borrowed in New York during the past Tew months, and all three had to pay 8 per cent. The people of New Zealand, as I have already said, must expect to pay more for their Joans, both public and private. The changes that I have endeavoured to indicate are such as one would expect in a transition period. The outlook is not .as promising as it was a few months igo. The effect upon our prosperity tf the reduction of the national income with which we are

faced will be in proportion to the prudence and courage we display in facing it. Undue optimism may prove as dangerous) as extreme pessimism; we must keep our heads and believe that, i whatever troubles may be ahead of us L i* l the coming year, we will surmount them—-in short, we must have confidence in our selv.es and in our destiny. New Zealand, with its marvellous powers of recuperation, cannot be permanently injured even by such a reduction in the value of some of its chief products a® has taken place.' All our past experience forbids us to expect that the low-level which has been reached toy some of our product® will be permanent. There will be a recovery, tout meanwhile those whose incomes "re for the present diminished muS« adjust expenditure to income. And if, as seems probable, the era of low prices i® coming—not only with regard to the things we produce but those in which our interest is only that of consumers—the adjustment, when it is over and settled conditions

of trade are again will perhaps be to the benefit both of our community antt our customers in distant lanffs-r-especially our kith and kin In the Mother Country, who have ! found it hard, and (sometimes impossible, to pay the high prices which I during the past years have been ruling | for all our produce, j Mr W. Watson heartily congratulated the shareholders on the presen? | position'. He said: Our best customer: the Government: is our partner on term’s which a few years ago few OP you anticipated; you have a sound and progressive business, and those of you who look for a good permanent investment, rather than to the vagaries of the sharemarket, will not be disappointed by retaining your shares.