COLONIAL MONEY MARKET

Westport Times, Volume VI, Issue 1019, 5 November 1872, Page 2

COLONIAL MONEY MARKET

The report presented at the 22nd half-yearly meeting at Auckland of the Bank of New Zealand shareholders, and from which wo make the following extracts, as of interest to the general public; presents facts proving conclusively that the wealth of the colony is rapidly increasing and money becoming cheap and abundant. So much so that New Zealand colonists may hope to soon be enabled to borborrow all money required for public purposes, or large commercial ventures, within the colouy, and be no longer dependent on supplies from without, obtainable heretofore only at usurious rates of interest, although for yet awhile longer proportionate facilities may be still difficult of access to speculative men of modest calibre.

11l their report the directors state that consequent upon the cheapening of money, and it abundance in the colony, with the absence of an active demand for its employment, profits do not compare favorably with past halfyears. They have, however to congratulate share holders on the maintenance of the Bank's leading position as evidenced in the half-yearly statement, and express a hope that development of commerce will soon offer more profitable employment for the Bauk's resources.

The net profit at 30th September, after making provision for all known bad and doubtful debts, and for usual appropriations in reduction of Bank premises and furniture accounts, amounted to £3S,7GO 2s ; to which has to be added —balance of undivided profit at 31st March, 1872, £7,600 3s ; making a total available for division of £-.10,360 ss. The directors recommended the following appropriation:—To payment of dividend at the rate of 10 per cent., per annum, £30,000 ; bonus of 2s Gd per share, equal to 2} per cent, per annum, £7uOO; balance carried to profit and loss new account £S.BGO Gs.

The Chairman in moving the adoption of the report, paid: Gentlemen, —lt has been the good fortune of the directors of the Hank ever since its institution to be able, at each half-yearly meeting, to place before you a balance sheet which commended itself to the shareholders for adoption—that has not required any apologetic or any ex planatory speech from the chair io satisfy your minds-as to the results obtained. AVe are again fortunate in this respect, for though our dividend is at the rate of per cent, per annum less than it has been in the- past half-year, I am sure those who have been observing the course of events during the last twelve months-—the increase of wealth in the colony, the lowering of the rate cf interest throughout this and other colonies, aud the more limited demand that has prevailed for banking accommodation —will be prepared for a slight reduction of dividend to-day. I think you cannot help regarding the results obtained as highly saniaiuctory, and a dividend at the rate of 12$ per cent, per annum as more than the equivalent of 15 per cent, under the circumstances of twelve months ago. T may state shortly by way of explanation that during the past half-year,'although our officers in .every part of the colony have been anxious to employ the bank's resources in every direction that they could do so with safety,—although they have been as active, zealous,, and energetic as ever, yet we have not been ab'e to employ within the colony by £OOO,OOO so much of the banks resources as wo were employing six months ago. Thero has been much less demand for banking accommodation within the field of operations occupied by this bauk, and even within the colony during the past half-year as compared with previous half-years, but apart from a restricted demand for banking accommodation, the diminished rates of interost on advances will go far to account for our' diminished dividend. The causes that have brought about this result are, 1 think, causes for congratulation to all of us as colonists and I am sure there is no shareholder who will not be satisfied with the smaller dividend when he sees that the causes which have operated to bring about snch a result are calculated to produce so much good to Now Zealand. The increased value of wool, tho suddeji rise in the price of that staple has introduced into tho colony a largo amount of capita 1 , and many of our customers who formerlv required accommodation from the

bank are thereby rendered indepetf dent of such assistance. Hence tho limited domand for back advance. This prevail* bot only hero but in all other colonies that are subject to the same condition as wool producing countries, and it affects all other insti. tutions that are occupying the ground, or are engaged in a field of operations such as we occupy. I will read to you a few extracts from the reported proceedings of kindred institutions rd this with the saino Geld of operations. Yon will see that tho causes which have effected tho diminution of the rate of dividend in [the Bank of New Zealand have also affected them. In one of the bank reports, read at a meeting recently held, tho following occurs :

The shareholders would remark the profits of the bank, as compared with those of the previous year, showed a small diminution, which was due in the first instance to the low rates of interest which had ruled in this country during the past year, and had not averaged more than 2f per cent, and in the next place it was more particularly referable to the redundancy of money and low interest now prevailing in Australia and New Zealand This redundancy of money and low rate of interest were certainly new features in the Australian money market; hitherto the value of money there as in all new countries, had been high; and the rate of interest had fluctuated between 10 and 7 per cent, but now the ordinary bank rate for 90-day bills had fallen as low as 5 per cent. This change had been caused by tho great rise in the price of wool of last year, a rise which; it had been estimated, represontjd two millions of money, all of which was, so to say, remitted direct from this country into the pockets of the fortunate sheep farmers in the colonies, and had in many c.ises rendered them quite independent of that banking accommodation which in times past they so eagerly sought. Hence the present plethora of money in Australia arid New Zealand. It was not a matter which affected their bank aione, ittouched all .Australian banks alike, for they were all suffering from its effects, and they all adverted to it in their recently published roports. Erom the reported proceeding of the Union Bank of Australia, the Chairman also read as follows:

The large and almost unprecedented rise ra the price of wool had completely changed the condition or" the Australian wool producers, and the. raising of wool had becouio so profit, able that the squatters and sheepfarmers who formerly came to them for advances had been able to pay off' their'debts and carry on their operations under the most favorable prospects. . . . And,anomalous as it

might seem, this great and sudden prosperity had to a certain extent tended to limit the business of the 1 bank. Sheep-farmers wu> used to come to' the bank for assistance were now able, consequent upon! the high price they obtained for t' : <> wool, to keep large balances to their' credit, ami no- longer required to borrow. This militated against largo' banking profits at present, but nodoubt the prosperity would re-act in various' ways; : the holders of capital would seek investments in other directions, and the sphere of tho bank'.'* operations and the expectations of legitimate additional profits- would be : increased.

Yon will thus perceive that the causes which have affected our operation and diminished our dividend have aim? affected them in like manner.. I may be permitted to congratulate you upon-, the hading position now held by tho' Bank of New Zealand in the Colony. There is no need to quote figures for the information of shareholders who' are present or who reside within the colony, and have access to the bank returns which are published periodically by the Government, and which they can see for themselves. But there are shareholders who have not access to these returns. These returns give the result of the operations in the 1 colony only, and do not include business transactions by the banks elsewhere. Now from the recently published returns you will observe that of tho notes in circulation which amount to a total of £65 1,539, the amount of the Bank of New Zealand is £314,085, as compared with £307,45-1; of all the other banks, or' more than half the note circulation of the colony. As to deposits, the business of which is divided between the four or five banks in the colony, they amount to a total of £3,903,221.. The deposits in tho Bank of New Zealand are £1,916,161, as compared with £1,957,063 in the other banks, or" about one-half of the whole. The discounts and advances amount io a total of £3,627,141. The Bank of New Zealand discounts and advances amount to £1,977,9-16, as compared with £1,649,195 by the other banks, or more than half of the whole, amount of bank advances made in New Zealand.

Referring to the causes that hadoperated in respect of tlio Bank of New Zealand as well as other.-*, and the increasing amount of colonial capital in the market, one of tho shareholders stated, br way of illustration of what tho President had said,' that lately there was offered in an Australian colony £190,000 of 5 per cent, debentures with t-u'rry years to run. Thex were offered there for sale. A fact in itself showing that the colonics are beginning to- ho then* owff creditors. The result was that tliero' were tenders for uioro than a million.--or about £1,200,000. ilk; average afc

which it was taken was 4 per cent, and a fraction over, much better terms than money bad been ever obtained in England. Referring to the proposed new " National" banking venture, originating in London, and shortly to commence operations in New Zealand, the Chairman said, " I really cannot see, with the great abundance of money that there is at command —so great an abundance that wc cannot employ it in the colony, and are driven to employ it in other parts of the world at a lower rate of interest than ought to be obtained in the colony,— with other banks in precisely the same position, and compelled to employ their resources at 2} or 3 per cent in Loudon, —I really cannot see where is the room or what is the position to be occupied by this new bank. Another colonial bank at the proper time would bo a good thing. But I think the time has not yet coruo for two Colonial banks." The actual profit and lors account of the Bank of New Zealand for the half-year, according to the report submitted to the shareholders, was as undernoted : PROFIT AND LOSS ACCOUNT. £ e. d. To dividend at the rate of 10 per cent, per annum ... 30,000 0 0 Bonus of 2s Gd per share, eqcal to 2 > s per cent per annum ... ... ... 7,500 0 0 Balance carried to profit and loss new account ... B,BGO 5 0 £4G,3GO 5 0 By balance of profit at 31st March, 1872 7,600 3 0 ~ Net profit for half-year, 1 - after writing off bad debts 38.7G0 2 0 £4G,3GO 5 0 'reserve fund. To balance 180,000 0 0 £ 180,000 0 0 By balance from last statement 180,000 0 0 £IBO,OOO 0 0