LOWER PROFITS.

Auckland Star, Volume LXIX, Issue 135, 10 June 1938, Page 8

LOWER PROFITS.

THE BANK OF N.Z. CHAIRMAN'S REVIEW. FINANCE FGR FARMING. ADVANCES POUCY EXPLAINED As already announced in the "Star," lower net profits at £583,209 were earned by the Bank of New Zealand for the trading year ended March 31, and the final dividend recommended makes a distribution of 10 per cent for the year. Deposits were returned as £34,700,000, and advances at £25,800,000. At the annual meeting of shareholders held in Wellington to-day, Mr. Wm. Watson presided, and apologised for the absence on account of illness of the chairman, Mr. A. T. Donnelly, whose address he read. Mr. Donnelly devoted special attention to the advances made by the bank over the past year, and to the features of its policy in this connection. Showing the relationship between deposits and advances, the following figures were quoted: — Deposits and Advances. , 1037. 1935. £ £ Free deposits .. . 14,103.568 14,632.854 Fixed deposits . . 15,894,530 15,012,780 Advances 2<>,359,409 23,404,079 The following tabulation shows- that the main increases in the hank's advances during the year were attributable to a large extent to fuller finance for farming and associated activities. March quarter analysis of advances (in millions of £). 1937. 1938. £ £ Farming 7.5 8.4 Industries allied to farming 1.9 2.9 Stock and station agents .3 .7 Totals 9.7 12.0 j '"The advances of these three group; p j represent slightly more than half of tin j bank's total advances and show ar increase of £2.3 millions over last year,' ' said Mr. Donnelly's statement. "This ; increase represents nearly four-fifths oJ the increase of £3 millions in the bank's total advances. This summary analysis reveals the extent to which the bani participates in the finance of farming and associated activities, and illustrates the peculiar cliaracter of the evolution of the business of trading banks in New Zealand. To an extent that has no parallel in most overseas countries, the trading banks of New Zealand have provided finance for farming industries and have thus varied the practice common to most overseas banking institutions. Such an adaptation to the particular requirements of the country has, however, proved both necessary and desirable and may, under the influence of changing conditions, require further extensions in the future to other fields of production. The special direction in which such finance may be required ami the extent to which it can be provided by the trading banks will, naturally, depend mainly on (jovernment policy. The board takes the view, however, that while it may legitimately discuss such changes as" a possible contingency, it is not in a position to define the extensions or variations of financial procedure that may be required until Government policy affecting tho development of industry has been more fully stated. Changing Conditions. "Nevertheless, certain changes in banking practice are gradually occurring under the pressure of altered economic conditions and of legislation. It would appear highly probable that the mortgagors' relief legislation has adversely affected the availability of mortgage money and that consequently the trading banks have been called upon to provide a considerable amount of finance which previously had been obtained from private lenders. The legislation has also affected the essential nature of overdraft accommodation, which under many decisions of relief tribunals has ceased to he a demand liability, but has been | fixed for long periods j>z years. It is true that similar arrangements have been frequently entered into voluntarily by the bank sii.ee the introduction of i the legislation, tc concede by settlement ' the relief that, in our opinion, would 1 have been granted by the commission, j "One development to which attention j may he drawn is the concurrent increase j in advances and decrease in fixed j deposits,'' continued the statement.! ■'The ratio of advances to deposits (both! fixed and free) for all banks has in 12 ■ months risen from 71 to 81 per cent.! This increased ratio is due partly to an ! absolute increase in the volume of i advances and partly to a decline in deposits. To some extent the decline in I fixed deposits is accounted for by with- i drawals of individually small siims for j transference to the Tost Office Savings i Bank, where si higher rate of interest j can lie earned, but there is a drain due j to the lifting of larger deposits for j investment purposes. Many businesses, I which in the period of depression were j unable to find satisfactory investments j for their surplus funds, placed them on j deposit with the banks and have, under j expanding trade conditions, since withdrawn them. j Source of Loans. "The banks' liquid assets available for lending are represented mainly by! the funds they hold at the Reserve Bank ' in excess of statutory requirements, and by their resources in London which are in cash or readily convertible into cash. Provision, however, has also to be made to some extent from these assets for an adequate cash reserve against deposits. If for any reason such resources are permanently diminished, the banks' ability to lend is. of course, affected. "During the year the bank has pursued its customary policy of granting advances wherever the security position was deemed to be sound. The* following table shows that the proportion of appli cations declined was very small, as compared with the total volume of business done (each item includes renewals and increases of existing limitsl : — Applications for advances . . £14.755,661 I Applications approved £13.505.347 Applications declined £947,314 Candidate For Vacancy. I After the announcement of Mr. William ! Waumn's impending retirement from the' board of directors, it was learned by! post th»t several influential shareholders ' had app .•ached Mr. A. E. Mabin, mana- * ger and director of Levin and Co.. Ltd., *' with a view to his becoming a candidate f 5 for the vacany. and Mr." Mabin has " consented. t s Mr. Watson retired on March 31. I *' d The earth is travelling at a speed of 18 miles, Mars 15 miles, Jupiter 8 miles, a Saturn nearly 0, and Uranus 4 1-3 niUes V a second. Yet they are all travelling r< round the eame sun. 0