BANK OF NEW ZEALAND

Taranaki Daily News, 4 December 1926, Page 4

BANK OF NEW ZEALAND

HALF-YEARLY MEETING ADDRESS BY THE CHAIRMAN. LONG DATED LOANS SCHEME. The half-yearly meeting of the Bank of New Zealand was held at the head office, Wellington, yesterday, Sir George Elliot, chairman of directors, presiding. Addressing the shareholders, tile chairman said:—■ To-day brings to an end the halfyearly meetings that have been held annually in December since the head office of the bank was transferred from London to Wellington. Beyond being the_ occasion of the election of directors and the declaration of a dividend, it is difficult to find any other reason for their institution. If there ever was a reason it has long since ceased to exist, and in the recent “Bank of New Zealand Act” the provision for holding further halfyearly meetings was cancelled. Mr. Watson has the honour of being the last shareholders’ representative who will be elected to the Board of Directors at a half-yearly meeting, and, as there are no other nominations for the position, I have much pleasure in declaring him duly elected. Mr. Watson has been, without a break, a director of the bank for 32 years, and his long banking experience and general knowledge are of no small importance in conducting the affairs of this great institution. There are, as usual, no accounts to lay before you, but I have pleasure in stating that the profits earned for the half-year ended September last warrant the payment of dividends similar to those paid for the corresponding period last year. Dividends will be paid in Wellington to-morrow, and at the various branches on receipt of advices. RURAL LOANS. The proposal discussed at our annual meeting of setting up a special department for the making of longdated loans on an amortisation basis was considered by Parliament last session and, as you are aware, an Act known as the “Bank of New Zealand Act, 1926,” was passed giving the bank authority to enter into this class of business. As a resume of this Act has been circulated amongst shareholders, I need not go over the various clauses. You will remember that the directors were authorised to issue £1.406,250 in £1 shares, together with three times that amount by way of debentures. As a beginning, half of this number of shares are now being offered to shareholders, and applications for their individual quotas are receivable up to December 31 next. The other half will be issued later if, and when, the demand for loans of this description warrants it. Debentures will be issued as funds are required for the development of the business. You will remember that when the scheme was discussed at the annual meeting it was with the hope that Parliament would agree to make some special reduction in the income tax in connection with this undertaking. The special Parliamentary committee set up to consider the Bill, however, was averse to the reduction of taxation in the form that we desired. In view of the fact that no driect profit could be made by the bank on this phase of its activities, the committee recommended that the shares for which the Government had the right to apply should carry a fixed dividend of 6 per cent, as against the fixed dividend of 7 J per cent, on shares allotted to the ordinary shareholders. As this reduction of li per cent, on one-third of the capital, together with the business of the department being taxed on the same basis as an ordinary joint stock company equalled the special rebate in income tax asked for, an agreement on these lines was arrived at. Power was taken in the Act that, > with the permission of the Minister of Finance, further issues of shares and 1

debentures beyond those immediately authorised could be made on the same lines, but no application can be made to the Minister unless the consent of the ordinary shareholders of the bank is first obtained. In the future, therefore, the matter of extending the operations of this new department will be made on the initiation of ordinary shareholders. AN EXPERIMENT.

As the making of long-dated loans on an amortisation basis by a joint stock bank is, to an extent, experimental, the ordinary shareholders, should they deem it advisable, have the right to wind up the long-term mortgage department, cancel the shares and return all capital at par. It is expected that the expense involved in connection with the activities of this new department will not be great, as all matters connected with it will be carried on by the staff already in existence at the various branches, and although no direct profit can be expected, it is anticipated that a certain amount of indirect advantage may accrue to the bank. The department will be watertight, trading on its own special resources, and no funds of the bank will be used in its conduct otherwise than that advances up to £500,000 from the ordin ary funds may be made pending the raising of capital or debentures. With this exception it is intended that the ordinary business of the bank and that of the long-dated loans shall be kept entirely separate. This is believed to be the first instance of an ordinary joint stock bank in any part of the world creating a special department for this class of business, and the experiment will, doubtless, be watched with keen interest by bankers generally, and especially by bankers in countries that specialise in primary production. The directors are convinced of the soundness of the scheme and of the benefits borrowers will derive from it. PRIMARY PRODUCTS. Since the annual meeting in June there has been little change in the prices of the Dominion’s primary products, with the exception of butter and cheese. After a slight lowering of prices earlier in the year, the London f-’ep-tembqr-October wool sales closed very firm, with active competition, and values, compared with those of June last, were about }d per lb. better all round. At these sales 196,000 bales were offered, 76,093 of which were from New Zealand. Continental buyers, principally German, purchased 93,000 bales, United Kingdom 75,000 and America 1000. Of the 34,000 carried

forward, 17,500 —probably owned by speculators—had been reserved i.nd were not offered for sale. The heavy purchases by German operators bear otit the cabled reports as to the active state of the woollen industry in Germany, and of the overtime that is being worked in many of the mills there. The first of the New Zealand woo] sales were held in Wellington and Napier on November 15 and 19 respectively. Unlike last season, the wool opened up in splendid condition, being sound and well grown. Competition was gcod, and considering the adverse circumstances under which the trade has been operating, prices were satisfactory, although in the coarser qualities they were slightly lower than those of March last. The coal strike has.'naturally, had a depressing effect on the British textile industry, but, notwithstanding this, taking it all round, the tendency has been during the last six months for prices for wool to harden slightly. The fact that practically the whole of the Australian and New Zealand clips for 1925 had been sold and disposed of, together with the half-million bales carried over from the previous season, accounts, no doubt, for the present steadiness of the wool market, and augurs favourably for the coming season. In view of the fact that there are practically no stocks carried over or held up either in Australia or New Zealand, there is every reason to believe that, the coal strike having been settled in England, the present prices of all classes of wool should be maintained for some time to come. Prices for meat, except for slight variations, have remained steady throughout the period under review The number of sheep in the Dominion in 1925 was 24,547,955, compared with 23,775,776 in 1924, and a further increase is expected this year. Without a doubt, the industrial unrest in the United Kingdom accounts for the decided fall in the value of dairy products. Under the ch cumstances the supply of butter and cheese has greatly exceeded the demand. An appreciable quantity of butter from a number of dairy factories was held up in the hope that the market would improve. This hope has, unfortunately, not been realised, with the result that deteriorating stocks are blocking the gangway of the new season’s: output just arriving in London. The 1 holding up of S perishable article involves a serious risk, and the New Zealand producer cannot afford such gambling on the market. What a speculator may do under given circumstances docs not affect the principle; in general, the wisest course for a dairy company to pursue is to sell and keep on selling. TOO MUCH TALK OF “CONTROL.” Since the formation of the Dairy Control Board, there has been far too much talk of “control,” and this idea of “control” is hindering, not helping, at the present moment. Once upon a time in Egypt, many centuries ago, “control” was successful, but that “control” was connected with wheat —a much less perishable article than butter or cheese, and, furthermore, circumstances were different. “Control” has been tried many times and in many countries since those far-off days, but with very little success.

There is no doubt whatever that the members of the Dairy Control Board are animated by the very highest motives, and are honestly trying to improve the conditions of the trade. There is no doubt, also, that the board was set up by Parliament at the request of the majority of dairy farmers themselves, but there is always a grave danger that the members elected to the board may not possess the training or knowledge necessary for the Tuiinr.g of a great business undertaking, and before they realise that they do not know as much as they ought to know, the affair they are managing may get into exceedingly deep water. From the inception of the Dairy Control Board it was obvious that “control,” if carried too far, might become a menace to the greatest primary industry in the Dominion.

As the chief problems of the Meat Control Board and the Dairy Control Board are identical, the merging of the two into one would result, not only in a great reduction in expenditure, but would make for greater efficiency, especially if the number of the members on the combined board were reduced considerably—say, to a total of five—two representatives from each industry, with a chairman appointed by the Government.

I am certain that one small, wellselected board could manage the business now carried on by the two boards much more advantageously from every point of view.

TERMINATION OF STRIKE. The termination of the unfortunate coal strike—estimated, directly and indirectly, to have resulted in a loss of at least £400,000,000 to Great Britain—will, in my opinion, be followed by great industrial activity there. It should also have an immediate effect on the values of*The primary products of New Zealand. As compared with the previous year, apart from Government deposits, the total average deposits of all the banks trading in New Zealand for the +hree months ended September last, have decreased by £1,770,571, while advances have increased by £3,127,375, making a total reduction in the resources of the banks of £4,897,946. The position is brought about entirely by excess of imports over exports May I remind you that practically the whole of our exportable surplus is shipped to the United Kingdom, and it is within the range of possibility that in the years to come the demand for our products there may gradually decrease. World conditions are changing. The tendency amongst the nations —not excluding the British oversea dependencies—is to heighten their Customs bar riers in order to encourage their manufacturing industries, and, as a consequence, British trade must suffer However much she may dislike the idea, Great Britain may yet be compelled, for the protection of her own people, to change her policy and follow the pernicious example that is being set her, and, by the imposition 'of heavy protective duties, close a market that has been open and free to the products of every race and nation. Canada for the Canadians, Australia for the Australians, New Zealand for the New Zealanders, are popular, if selfish mottoes. If Great Britain adopted the same slogan and acted on it, the export trade of New Zealand, at any rate, might be prejudicially affected. Our country cannot have it both ways; she cannot expect indefinitely to have a free market in the Old. Country if her own Customs door is gradually being closed. In the event of a revision of the New Zealand Customs tariff, this aspect of a very serious question should’ receive the most careful consideration.