BANK OF N.Z.

Taranaki Daily News, 29 October 1920, Page 5

BANK OF N.Z.

GOVERNMENT'S SHARE. BILL TO INCREASE IT. (By Wire—Parliamentary Reporter.)' , Wellington, Last Night. The long looked for Bank of New Zealand Bill made its appearance in the House this afternoon It will be discussed to-morrow. An explanatory memorandum details the financial story of the bank in conjunction with the State as the remit, of the Act of 1013. The Government then obtained its present actual beneficial holding in the assets and future of the bank' of 37,500 shares, as against 225,000 shares held by the ordinary shareholders. That Ls to say, the Government holds one seventh of the total of such shares, and the shareholders sixsevcnti.s, but every future increase in the capital will effect an increase of the direct interest and share of the Government in the bank. If the principle of the Act of 1913 be adhered to, and if of every three new shares the Government takes one, the Government's proportionate share of the whole beneficial interest will be thereby gradually increased. On the other hand, an increase of capital involves a les3 dividend upon each share, and the result might be to reduce below 10 per cent the dividend on the A preference shares.

SHARE VALUES CHANGED. j The bank's reserve fund, as shown on it's last balance-sheet, amounts to £2,500,000, and the bank desires to capitalise £1,125,000 of that reserve by the issue of shares fully paid up. It also desires to make all its shares of the nominal value of £1 each, instead of £6 13s 4d There is no objection on business principles to either such proposal, and the bank offers to the Government the following advantages: (1) The dividend on the A preference shares shall be henceforth a fixed preferential dividend of 10 per cent; (2) out of the new 1,125,000 shares of £1 each to be issued, there shall be added £375,000 to the Government's B preference pres-. ent holding of £250,000, that is onethird of the whole of the new issue, tho Government's proportionate share of the whole beneficial interest being thereby increased from one-seventh to more, than one-fifth; (3) but the Government is at present entitled to only one-seventh of the reserve funds, and would therefore actually be entitled to only a little more than 160-700 of the shares to be paid up in full out of the reserve fund. The adjustment of the position, which allots to the Government nearly 215,000 more shares than its actual quota, has been arrived at by two provisions: Firstly, that the sum distributed in dividends in any year (exclusive of 10 per cent on the A preference shares) shall, up to £306,250, bo divided oneseventh to the Government and sixsevenths to the ordinary shareholders, which is exactly what the Government would receive if this Bill did not pass; and secondly, that any amount distributed above that sum shall be divided one-third to the Government and twothirds to the ordinary shareholders. The second provision is a substantial benefit to the Government in comparison with its present share in the divisable proI fits,

ADDITIONAL INCOME. Mr. Massey, in introducing the Bill, said it had been referred to the public accounts committee of the House, who approved of it. The Treasury, the auditor of the bank, and the AttorneyGeneral were all satisfied with it. Mr. T. M. Wilford (Leader of the Opposition) said if all these were satisfied the House could hardly object. Mr. Massey said it was his iirst Banking Bill, and he had been particularly careful with it. The Government would now have an interest in the barfk under the B shares of £825,000. The additional income to accrue under this, which was only an estimate, but from a particularly good source, would be approximately £18,750 per anmim. The Government's present share in the bank was one-seventh of the total, plus the A shares. What was aimed at by ■'the Bill was to increa-se that interest "from one-seventh to one-third. The re-ad-justment that was also intended was probably as important as the transfer. When it took place it would leave the capital as follows:—A shares £500,000; B shares £G25,000; ordinary shares at £1 each £2,250,000; leaving the capital of the bank £3,375,000.

A SOUND POSITION. The shares of the bank had been of the nominal 1 value of £6 13s 4d. There had been a recent call during the last few months which had brought the value up to £lO, and now it was intended to divide the £lO shares each into ten ( £1 shares. The intention .was to democratise the institutions, and make itt the small man's bank. The capital transferred would be more easily handled as working capital than as reserve. The shareholders would themselves have the first chance of buying the shares at par, and then the public would come in. The reserve fund, which now stood at £2,500,000, would be £1,375,000 temporarily, at least. He had looked very closely into the matter, and he did not think that any bank in proportion to its capital eouM be sounder or in a better position than the Bank of New Zealand.