BANK OF NEW ZEALAND.

Taranaki Daily News, Volume LV, Issue 170, 5 December 1912, Page 8

BANK OF NEW ZEALAND.

_ CHAIRMAN'S ADDRESS. THE MONEY MARKET. i INTERESTING COMMENTS. By Telegraph—Press Association. > Wellington, Last Night. ! The lihlf-yoar-ly meeting of the Bank of Now Zealand was held to-day. Mr. Martin Kennedy, chairman of directors, said:—This being jthe "half-year general meeting" of proprietors, there is no statement of accounts to submit to you. The only actual business to be transacted is the election of a shareholders' representative on the Hoard, and the declaration of an interim dividend. With regard to the former, I have, to slate that the retiring director,-Mr. Win. Watson, has again offered his services, and there being no other candidate, I have much pleasure in declaring Mr. j Watson duly elected. He has now occu-1 pied a seat on the Board for some eighteen consecutive years. | Though no accounts arc submitted, I! am glad to be able to inform you that tne profits for the half-year ended September 30 last, compare favorably with , those for the corresponding period of any previous year. • j Mr. J. B. Reid, who was absent from the Dominion on the occasion of our last meeting, returned in October, and we were pleased to welcome him back to his seat on the board. We regret, however, that he is not with us to-day, he having quite recently resigned his position as a director. ' I have Mr. Reid's authority to say that, in resigning from the directorate," he was prompted by a desire to open the way for the appointment in his stead of a director able to devote more time to the duties of the position than he finds it possible to give. It affords me pleasure to say that Mr. Reid has always taken a keen interest in the affairs of the Bank, and his retirement is a matter of very great regret to hii- colleagues on the Board. He, however, urged the course he has followed as being the best in the interests of the Bank, and the Government have met * his wishes and accepted his resignation, appointing in his stead our old colleague and former chairman, Mr. Harold Beauchamp, whom we have much pleasure in welcoming among us again to-day. The hardening tendency of the money market, which I commented upon when I addressed you in June last, has since been accentuated both in the colonies and in London, and in view of the conditions generally it has been deemed prudent to continue the pursuit of .the somewhat conservative policy adopted early in the year. At the same time, we have met the legitimate requirements of our customers, and have given the necessary support to the industries and trade of the Dominion. While there have, of course, been cases in which we have deemed it advisable to refuse accommodation applied for, we think that, on the whole, our customers recognise that we have responded well to their applications. The existing state of the local money market brings home, to us very forcibly the, facility with which financial conditions change in these colonies. It is but some eighteen months ago that my predecessor, addressing you from this chair (in June, 1911), remarked upon the abundance of money available, and the restricted scope for its employment. At > the present time we are experiencing an exactly opposite state of affairs. The scope for employment of money is at the present time wide, but the money is scarce, and the demand for accommoda- . tion, though in most cases quite legitimate, is greater than the banks feel themselves justified in satisfying. I see nothing in the immediate outlook to warrant an expectation of an early return to easier conditions; indeed, there are not wanting indications that an even greater degree of stringency may lie ahead. Under the circumstances, the . Board have of late been considering whether the time has not arrived to propose a substantial increase in the Bank's rapital. The existing capitalisation of the Bank was fixed by statute in 1003, and we are legally advised that, without ' legislation, nothing of a definite characT ter can be done by shareholders in the direction of increase. We therefore j think it will probably be desirable that steps should be taken, in the next ses- . sion of Parliament, to obtain authority , for the shareholders to increase the capital from time to time, as they may deem expedient, by resolution in general meeting in terms of the Bank's deed of settle- ' raent. There can be no doubt that, at ' the present time, an accession of capital would be of great benefit to the com- ' mercial and industrial interests of the ' Dominion, as it would put the Bank in the position of being able to afford financial assistance in many quarters where 1 at present it has to be refused. It would '■ also undoubtedly be in your own interests, as it would enable us to extend our ; connections and cement valuable and profitable relationships. Legislation will be necessary next year • if the £1,000,000 4 per cent, guaranteed i stock wliich matures on July 19, 1914, is to be renewed under the guarantee of ' the New Zealand Government. We thcre- , fore propose, with your approval, to make application to the Government, requesting them to introduce into next session of Parliament a Bill conferring j upon shareholders power to increase the Bank's capital. Notwithstanding the stringent finan-' cial conditions, the state of the Dominion's trade and industries appears to be prosperous. The season bids fair to be an. abundant one, and the prices of our staple wool—are highly satisfactory. There is every indication that the prospects for wool are | exceedingly bright "for the coming season. The improvement that has recently taken place in the hemp market will, if maintained, no doubt result in renewed activity in the flax industry. The recently published trade statistics for the year ended September 30 last, 1 show a gratifying expansion in the volume of our exports for the year, the figures being:— Exports for the year ended— Sept, 30, 1911 £19j9'12,G5G Sept. 30, 1912 20,714,595 Increase £801,939 This movement bids fair to continue during the current year in an increasing. ratio, the figures of our principal exports '; I for the month of Octobtr-, compared with I the corresponding month of last year, i

showing a very encouraging growth, namely— October, 1911 £Ol-1,1)07 October. 1912 <!53.202 On the other hand, however, the imports for the year have shown a more • than corresponding increase, the figures j being as follows: —• liiipoiis for the ve;ir ended Sept. 30, 1911 .." 19,015,291 Sept. SO, 1912 19,015,291 Increase £1,003,331 For many years to come. New Zealand will be in'a state of development, and consequently dependent to a large extent upon cheap loan money. In ordinary times, the livings of the people, and the borrowings of the Government and of Local Bodies from abroad, enable this demand to be met: but owing to the genera! unrest in Europe, to labor strikes jand war clouds, with lately the actual j outbreak of hostilities in the Balkan Peninsula, our principal source of supply '--London-has been practically closed to jus for some months past, and it will probably be some time yet before the loan propositions of any of our local bodies , will meet with a favorable reception in ! the London market. The 'States of th" I Commonwealth of Australia are in th' i same position as ourselves in this respect ' So long as this condition continues, it beLhoves all local bodies and other borrow- ) ers, having projects of expenditure on -.hand, to make their financial arrange- '' ments beforehand. -1 c It is no doubt known to many of you i j that I propose paying a visit to, the Old i;Country, leaving Wellington this month, i. r expect to return to New Zealand in - seven or eight months. During my stay 3 in London I will have the opportunity !;of further familiarising myself with the ■. Bank's buincss there. I will be able to . , confer with the shareholders there on i the matters above referred to, and I hope -1 to come back, furnished with fuller t knowledge than T at present possess, to !, 'assist the Board in its deliberations on -jtlic important questions affecting the f i interests of the Bank and those of the t' shareholders, which, as I have, already . i indicated, may fall to be dealt with i , next year. -I i .THE BANK AND THE GOVERNMENT. H HISTORY OF THE TRANSACTIONS. el Mr William Watson said: —I thank - 'you for again re-electing me to the Board v of Directors. In view of the legislation ii' which the Board are of opinion should e be applied for to be enacted next Parliae|mcntary session, it will be well for you b . to carefully consider your requirements - (and to formulate them. ' Naturally you 1 will expect your representatives to lead 1 'in the matter, and to provide a basis for . ' dieussion. At this stage, what I recom'mend should engage your attention as i, the principal objects to be desired are, ? i freedom to increase capital, renewal of i I the £1,000,000 guaranteed stock maturing ), in July, 1914, and greater representation on the board of directors. Other mat--7! tei's for consideration may arise at a ! later date. -j With regard to increase of capital, our t solicitors are of opinion that, notwithstanding the general Banking Act of r' 1908, a further Act of Parliament is .| necessary in our case. The provisions of , such an Act may be the subject of eontjsiderable diversity of opinion, and it is T of the very first importance that the r. Bank's shareholders in Great Britain, t Australia, and New Zealand should have s ample knowledge of the situation, and . opportunities to discuss and resolve upon ~it. 1 At the meeting of shareholders held on 2 10 th June, 1911, the Chairman gave a j brief review of the history of the Bank, . and an inset to the printed report cireu- , lated among shareholders contained a " a ', table of figures showing the position and B | business from ISG2 to 1911. I shall now p supplement that review to some extent. The capital subscribed and written off was £1,500,000; premiums paid on cerI tain shares, written off. £270,427; reserve f : liability paid up and written off £457,j 040. Total, £2,233,473. Present ordin,'lary share capital paid up and carrying I £500,000 further liability, £500,000; I amount paid in by ordinary shareholders, ;. £2.733,473. j!) Tt is legally held, and lias been stated "j in' Parliament by a former Prime Minister without controversion, that the Rei serve Fund and goodwill of the Bank i belong to the ordinary shareholders, and this must be the view taken by all fair- " minded men. In the present circumstan- " ces, the benefit you derive from these j magnificent assets is £2 14s lOd per cent. on the money actually paid in, and for \ many years you derived nothing at all. • I have had numerous communications from shareholders suggesting that, as in' ; other institutions, the capital lost in : times of adversity should be replaced from profits in times of prosperity, and ; I cannot regard their views as either unfair or unreasonable. In Australia, ■ when the same wave of depression compelled several Banks there to close their doors, legislation, was passed by which _jthey were rehabilitated without'liability ; by the State, or recompense to it be"- ■ yond warding off financial trouble. In this Dominion different arrangements ' were made, whereby the State did incur temporary liability, and they are so •/well known that I need not recapitujlate them here beyond saying that, besides- certain guarantees, the Governjment, without loss to the State, took i £500,000 m preferred shares bearing 3% per cent, interest, to be paid off at the Bank's option. These were paid off in 1900, and for a few years the Government held no share interest whatever in the Bank. The preferred shares so paid off, or .re-purchased, were held by the Bank, .in terms of the Act, available for re-issue at the Board's option, and had the Board decided upon re-issue, the shares would, as prescribed bv the Act, have been offered in the first instance to the ordinary shareholders rateably The latter provision dearly recognised and 1 safeguarded the right of the ordinary shareholders to be the proprietors of the whole of the shares in the Bank, both ordinary and preferred. This right continued m existence until it was withdrawn in consequence of legislation passed in the year 1903. The ten years for which the Government lent assistance to the Bank were expiring in 1904, and legislation was sought—in the session of 1903 -for a renewal of it, but to only about half the extent of what was "-iven prejViously. At the time, viz., in "1903, the Bank was doing so well that, three afterwards, it paid off all its liability in res- , | poet of the Assets Board, and there only

remained <,he £1,000,000 Guaranteed] Stock for which (he State hud any lin-j bility. For that partial renewal the Go-'i vernment at first demanded to he allow- \ ed to purchase £.",00,000 fully paid shares "i to 1)0 called ".Stale Shares." which were ' lo rank equally with the ordinary shares for dividend and for all other purposes, but to confer no voting power. They also asked for a commission at the rate of 1 per cent, per annum on the amount guaranteed. These onerous terms were strenuously objected to. and it was ultimately arranged that the then existing preferred shires should he cancelled and ( that the State should be permitted to take up £."500.000 preference shares in the then flourishing institution, on a sliding scale as regards dividends; the yield on thc_ investment feeing 5 per cent', at the beginning, with rapid increases, until two years ago it reached the maximum of 10 per cent., which has .since been the rate paid. This was conceded far 1 as lam aware—any strong grudge on the part of the shareholders. But it was understood then that the concession was a full one from a business standpoint, and it was expressly agreed to he full and final compensation for anv claim the Government had for the assistance they had given and were to give; and proof of this agreement can be produced if necessary. With regard to the £1,000,000 Guaranteed Stock, the Bank is now quite able to redeem it from its own resources; but seeing that, we do not take anv lixcd deposits in Great Britain, and that good business might have to he curtailed m consequence of redeeming it. T am of opinion that, as much in the interests of the Dominion as of the Bank, it should be continued. As it bears interest at -1 per cent, however, that is as much as the Bank should have to pay for it. I again state liere what I have said in this .place before, and what in known to most shareholders, that the mono* lost by the Bank went in most part to develop the Dominion of New Zealand and tint the help the Government gave has not involved the country in the loss of a single penny. The position and equities of the case keing known to you, T have no doubt you will safeguard your interests hv eom(municating your concerted views to your representatives in good time, to enable them to make the representations you desire in the proper quarter and at "the proper time. Mr. Kennedy is shortly proceeding to England, and as about half the shares are held by residents there, I trust that the opportunity will he taken by a committee of the British shareholders in this country to favour him with their views. On his return to New Zealand the shareholders will'have an opportunity to express theirs in general meetnig before the next session of Parliament.

At the conclusion of Mr. Watson's speech a discussion took place on the question <of reserve securities held in London.

The matter was introduced by Mr. Macintosh, who asked the following questions: What is the exact nature of the British Government securities held to the value of £500,000 as part investment for reserve fund? What was the cost of these securities, and what is their market value to-day? If there lias been any depreciation has full provision been made? When was the purchase made and at whose instance? Did it have the approval of the London Board? The chairman said it would be most undesirable if such detailed information were given, not that there was any difficulty in replying, but the establishment of such a precedent would be a very bad one. Mr. Kennedy added: May I ask Mr. Macintosh to accept my assurance that on all securities held by the bank ample provision has been made at the end of each financial year for such depreciation as has occurred in value of such securities during the year. That course had always been followed. Mr. Macintosh thanked the chairman for such information as he had given, but the point was should the Board invest in speculative securities? It did not matter to him whether the question was answered or not, but shareholders ought to know whether the course adopted should have been followed.

The chairman, added that lie supported the course. He was in London in 1007 and saw a, good opportunity for investing in Government securities, and the Board here authorised the London Board to do it. To the bank it was better than stock at current rates in the ordinary market.

A shareholder asked whether British stock was highly speculative stock? The Chairman: There is scarcely a bank in Australia that docs not do it if anyone calls. Consols are highly speculative, and the probability is that wo have some of them. No doubt they had taken a downward tendency, be added, but he pointed out that they got the same rate of interest.