THE COLONIAL BANK OF NEW ZEALAND.

Auckland Star, Volume XXV, Issue 237, 4 October 1894, Page 7

THE COLONIAL BANK OF NEW ZEALAND.

HALF-YEARLy.-MEETING,

TITE AMALGAMATION SCHEME

DISCUSSED.

The half-yearly meeting of the proprietors of the Colonial Bank of New Zealand was held at Dunedin on Sept. 26. The meeting was the largest hold since the inauguration of the Bank, many ladies also attending' The Hon. G. McLean, Chairman of directors, occupied the chair, and other members of the Board presenb were the Hon. W. D. Stewart, Hon. R. Oliver, Mr D. Hislopand Mr P. C. Neill. The report of the directors was submitted as follows: —

The directors have pleasure in submitting to the proprietors the accompanying balance-sheet and statement of accounts for the half-year ended 31st August lasfe. The neb profits for Hie half-year, after deducting interest paid and accrued on fixed deposits, rebating bills under discount, and charging all expenses of management, rent, etc., and duly providing for bad and doubtful debts, amount to £18,674 6s 7d, to this has to be added balance from last half-year £5,791 14s 4d-£24,466 0s lid; and there must be deducted tax on note circulation and land and income lax £2,238 9s 2d, leaving available £22,227 lls 9d, which the directors recommend to be applied as follows:—Payment of dividend lit the rate of 7 per cent, per annum on the paid-up capital, £14,000 ; balance to be carried forward, £8,227 lls 9d. Total, £22,227 lls 9d. A provisional arrangement for the amalgamation of the Bank of Now Zealand and this Bank is now before the Legislature, and should they approve of it, resolutions for your approval will be submitted to you at the meeting.—Signed, Geo. McLean, Chairman.

Balance Shket.—The following is the balance-sheet as nt3lsb Aug., 1894, including London Office at 31st May, 1894:— Dr : Capital £2 paid up on 200,000 shares, £400,000 ; notes in circulation, £107,980 ; bijls payable and other liabilities, £609,929 10a sd"; deposits, £1,958,959 13b" "4d jj balances due to other banks, £5,916 4s 5d ; reserve fund, £65,000; profit and loss, £22,227 lls 9.1; total, £3,170,012 19s lltt. Cr. : Coin, bullion, and cash balances at bankers, £415,796 2s 2d ; Government securities, consols, etc., £170,408 19s 9d ; notes of and balances due by other banks, £7,333 2s 4d ; remittances in tranaifcu and awaiting maturity, £523,616 9a Id; landed property and bank premises, £123,872 15s 'M ; bunk furniture and stationery, £10,199 ISh : bills discounted, and all other debts duo to the bank, £l,018;785 13s 4d;- total; £3,170,012 19a lid.

Profit and Loss Account.—Dr. : To transferred to reserve fund on 28th March, 1534, £5,000; dividend ab 7 per cent, per annum at £Bfch February, 18S4, £14,000; charges for the half-year, including rent, taxes, ealaries, remuneration to directors and auditors, and all other expenses at Head Office, 31 branches, and 10 agencies, £24,806 lfi ; tax on note circulation, £1,183 6s Icl ; land aud income tax, £1,055 3s Id ; proposed dividend ab the rate of 7 per cent, per annum on the paid-up capital, £14,000; balance, £8,227 lls 9d : total, £68.272 Is lie. Cr. :By balance profit and loss at 28thi February* .1594, £24,791 14s 4d ; gross profit for halfyoar (after making provision for bad and doubtful debts, interest paid and accrued on fixed deposit*, and rebate on bills current) amounts to £43,480 7s 7d ; total, £68,272 le lid.

Reserve Fund.—Dr. : To balance, £65.000. O.: By balance 28th February 1894, £60,000 ; by transfer from profit and loss, 28th March, 1894, £5,000: total, £Cs,oyo.—(Signed) George McLean (Chairman), H. Mackenzie (General Manager), Thomas Moody and Henry Uoee (Auditors, Dnnedin), Thomson, Jackson, &onrlay and Taylor, C.A. (Auditors, London). The Hon. <J. McLean said: I ..have again to congratulate you on the balancesheeb which the directors are able to place before the shareholders. Although the future goes, nob look quite-so promising. a$

we could msb for _good banking profits, id baa nob been considered necessary on the present occasion to curtaiL the usual dividend of Beven'pßr'cent. per'annuin SKatftiaa; been paid you for the lasb thirteen years; bat, when one comes to think of what has occurred to other banking institutions during tbo eanje period whoßO dividends have fallen from eighteen per cent, to sis per cent., a note of "Warning is hardly i necessary. The transactions in tho balance-sheet itself do not call for any special remarks, our volume of business having been fairly well maintained. ' I now come to the auestion that must have bead uppermost inyour mindß—thab of amalajftmation with, the Bank of New Zealand-* and I will endeavour to explain the circunj. stances that led up to the production of t*K| scheme which was to have been placed before you. lam aware that there aro among our shareholders a considerable number op. posed to amalgamation, and with that opposition the directors have great, sympathy '.■'.. their only desire being to do What is'beat": in the interests of the shareholders, and , there is no circumstance connected with this bank thab makes the adoption of the scheme a necessity. 1 will, however, pro- ' • ceed with my explanation. A grave crisis v in the affairs of the Bank of New Zealand: ; suddenly appeared, a. crisis not unforseen by some people, bub which apparently' ■ came on the Government as a surprise, and had to be "promptly dealt with. The reports of the debates in Parliament show that, while many members entertained ; grave doubts as to propriety of the step proposed by the Government, no one ventured bo oppose strenuously. Ib was felb that the Government were in a difficult)/ ;■ position, and must under the circumstances be trusted. At the same time it was thought thab a cruel blow was being delivered aba local institution a like > oura by providing the Bank of New Zealand with money at a cheaper rate ..-■„ than that ab which we mighb expect to gab/ it. You are awaro of our policy of limiting the amount of money we take on deposit in London. Owing to the previous .;„ . difficulties and writings down ia the Bank of New Zealand followed by the great Australian banking crisis, our deposits in lika manner as those in other banks, were to t some extent withdrawn. When confidence was restored wo, as a strengthening measure, issued instructions to our London office further reducing the limit up to which we would take deposits, and now bold there only some £360,000, the due dates ■ of which extend over a period of five years., At the tima the Bank of New Zealand guarantee was given hero we in London were, owing to a variety of reasons, in an exceptionally strong financial position, having funds far in excess of any draiu that could possibly como on us in tho colony. We had ample funds./ for our requirements, and the, Govern- : ment having re-enacted the law of the previous year empowering them under certain conditions to legalise the note issue, could easily have allayed any panic in con-' nection with a bank in this colony. Having thus shown you how any difficulty could be, . effectually met, I will now tell you whab ..;■;. action was taken to strengthen our position and credit. You know we have for some; time past had a third share of tho Government remittances to London, and thab although we were nob parading it, lately ; we were losing no opportunity of urging on ■ the Government our claims for a portion of ' their operative accounts, I cannot do •' bettor than read the letter we addressed to the Premier on this subject on 20th July last, as ib contains much t information interesting to shareholders :—

Wellington, 20th July, 1894.—The Hon. R. J. Seddon, Premier of New Zealand: j. Sir,—l have the honour to bring before you ,v; the following remarks in connection with this Bank:— i U? (1) The shareholders number abouk v 1,350; "the capital is £1,000,000, ofVi which £400,000 is paid up; and with the exceptipp of Bpme £3p,000 held by psvsg|i| '■■■'/ yrlibjin'Australia"'an'd'&reai Britain,1 are still connected with the. colony, the : ; whole of the capital is owned by shareholders resident in New Zealand. There # are forty-two branches and agencies spread ; over the most importanb industrial, agri- Si cultural, and mining portions of the colony, '/ and, with the exception of our London ; office, we have no branches outside the ; colony. The depositors and current account holders number about 15,000. The busi- : ness is particularly well spread, and the - deposits themselves almost entirely come - from the earnings of the industrial and -S wording clasEes. ' . .:.'; (2) Our aim has beentoencourage and sup- . port the trade and industries of the colony, :J in support of which I would mention the : y£ important dairying industry of the South * ' Island, which since its inception has been, fostered and brought to its present state of W usefulness chiefly through the instrumentality of this bank. Our efforts, have, however, been greatly thwarted, not speci- '} ally in reepect to the industry mentioned, " but with regard to our own welldoing, by ;; the competition we have had to deal with, competition which iB now shown to have f been very unfair. Notwithstanding this, c however, we have managed to pay our a-i. shareholders a return for the past twelve years of 7 per cent, per annum, augment : | our reserves, and maintain our business aiid'i'p capital intact^

(3) Two years ago the late Colonial' Treasurer, under the following circumstances, gave ua one-third of the London remittances of the Government. When tha ': Atkinson Ministry came into power in 1887 . the necessity was apparent for a consider- v able amount of money to be at once found in London. The Government bankers were unable to' provide this. Application wbb ■ then made to a foreign bank, and later to an insuiance company, in each case without : success, and then to us. Within a week we supplied the Government with the necessary funds to the amount of £700,000, and' Bared the qolony from making default irv paying its interest due in London. ..The ■ circumstances in connection with this formed the basis of a Parliamentary inquiry in 1892, and all the particulars are on the record of the House of Representatives. { The Committee thab examined our petition .^ recommended we. be granted a portion of the^ Government's London remittances, and this was aerreed to. While we are grateful for whati Parliamenb then gave as I would with deference bring to your notice thot.it is■ difficult to profitably transacb this particular branch of the Governinenb business by itself unless the remittances are made to some extent regularly. Bills drawn againsb colonial produce shipped to London have by us to bo purchased in anticipation ofthefssue of drafts to the Government..; If, after provision has been made to meefc » such drafts, later on the Government nn<r . thab they do nob require to remit the banks • ' money, which in the meantime might have been profitably employed in the colony, re- > mains unproductive on London. Sucn lately has been the case, apparently in consequence of circumstances connected with the Bank of New Zealand. We estimated having to provide for the sale to thfl» - Government of £600,000 per annum spread over the twelve months. We have apparently, owing to the above circumstances in four and a-half months sold only . £35,000. I feel certain Parliament intended y we should have eonio lasting benefit in return for the assistance wo gave tuo colony, and I consequently venture to explain to you. Aud this particular business under exceptional circumstances, for wine we are nob responsible, can only with aimculty be carried on properly. _ . (4), The tendency of the late legiclation as far as the Bank of Now Zealand » con- - cerned must have a detrimental e"f\°. n us. - Naturally, though not at all truly, t»« public, seeing the relations of lomm periodically made by that institution tbio« thab we in our business must bo to some ex- . ten* on all foura with it. Th» effect of tn«

t i mr nhares, though never better pro*J*SZ S' are «VIT. 2bE3 *tlv depressed* and shareholder^ obliged 2"do DBoit a°vei7 h^y »«»■ on tba real fcbe circumstances I think you f Lterfcain no doubt we have as strong a T' m as any bank can have for the conta£n of the Government for a share of it Government accounb and I accord- • i« tott yoor favourable consideration • «nfl third of the operative account i thacolony, such a B ib may suit your i cnrfl to cive us, and such as was yester--8 ,/rrsd on you by the representative of SbS of Zealand toWe us. We w, the requisite machinery for carrying ib • Jd to a bankar of thirty-three years' T'i I venture to predict that in the tt -Sch I connection would prove of 1 ■ Arable value to the colony—the more C 0" iti is recognised in • financial circles '? h the Bank of Now Zealand is even yet Tfrom strong, and our active co-operation S thetn would give enhanced stability to b°fSl Tn a recent Acb you have arranged !T objection to your adopting the same Lrso'with us, and appointing an auditor m examine and report from time to time to he Gover.rn.enb on tho condition of this Tnk • on the contrary, we should bo glad if Hh an appointment were made, and, in Section with it, would merely ask in the interests of our bunines3 thatßuch an officer ",,-Ulcers as you may so appoint; bu sworn rSrocy. - (Signed), 11. t&oKMuv, general Manager."

Thw letter, the Chairman continued, nnta our position fairly, before the Government, and you will observe by bhe laab tmraaraph that wo courted, before they Lit further with, us, a Searching inquiry by them into our affairs.. As a matter of {act we feel that an inquiry by a competent officor would only have the effecb of materially strengthening" our position with tho public I arrive now ab the period when the Bank of Now Zealand and our representatives, came together, to see svhother a scheme of amalgamation satisfactory to all could be arrived at. At first the difficulties seemed insurmountable and I here wish to state t>ab no 'representatives ever meb together with a more earnest desire to produce a jncheme that would be fair to bobh parties, and at the same time conserve the interest of fcbe colony. In producing this scheme we were quite aware thab it bad to run the gauntlet of jealousy, party tactics, and other influences, which, as they are apparent, I need not mention. On the whole, wo are not disappointed ab tho resulb. The Bcheme bas generally been accepted as giving the colony some guidance as to how the difficult position in which late events bare placed the Government mighb be tamed to account by placing a bank in New Zealand on a substantial foundation, by giving the colony relief through the properties in the Assets Company being taken in hand with a view of judicious liquidation, and by giving the shareholders of the Bank of New Zealand an opportunity of putting their institution on & sound footing, those shareholders . giving tho Guvernmeub in return all the security they have to offer. The main objection taken to the scheme is that, tbe colony having guaranteed the Bank of New Zealand two millions, is now asked bo guarantee the Assets Company, but, as a matter of fact, the Bank of New Zealand arc tho only shareholders in that Company, ami consequently the two million guarantee applied to both concerns. What this tcliftne was designed to effect Was the ttiiMmjf up of a strong bank and the separating of t.ho dead assets, so that they could bo handled without injuriug the credit of the Bank. On being satisfied thab the Hank of Now Zealand .capital was writicn down and provision made to meet orcertninoc] Iqsßej and. for doubtful accottnfci «(' proposed to pub in our capital of £JOO,IGO, which would have added to tho fafeiriianisafjainstiloss tothe colony through Ihe guarantee of two millions. Wo then )iro|Ki.«utl to hand over all our assets, and thfi new fJatik was to have undertaken our liabilities, Aft.«r an exhaustive examination, and Lho rejection of anything doubtful, tho benefit you gentlemen were to hr.ye received in return would have beeu thab you shares in a strong institution, starting with undoubted business on a now careor, po-seasing all the elements of success. Objection has boon taken tothe removal .of the reserved liability from our shareholders, bub it would have been manifestly unfair to have kept tins liability hanging over your heads while the reserved liability of tbe shareholders in the bank of New Zealand was taken hold of by the Government to answer any deficiency in the realisation of tho Assets Company. I will now review the success attending our institution —tbe Colonial Bank—in the shape of its earning power, so thab the public may see if the proposed amalgamation had been carried out) the strength in this respect that we should have brought to the amalgamated institution. I propose to take a period of 'even.years, from 30th June, 1887, tho dare when the Bank of New Zealand's dirocaltiea firsfe became apparent. Y"ou will at the same time, gentlemeo, bear in mind how securities have depreciated, nnd the utter impossibility during 'he terra I refer to of conducting banking business without making losses. I, therefore, state that since the 30th of June, 1887, wo have from profits applied the sum of £165,836 17s 8d against depreciation in |no value of securities in making provieion wr debt 3 insufficiently secured, and in Writing offthooe thab were bad. In addition to this we have, in bhe period to which J icfor, bfon dble to pay regularly a 7 per cenr. per annum dividend on our paid-up capital, nusmenb the reserve fund by Slf.QOn (which now, stands at £65,000),. and to increase the sum carried forward by m,2U5 8d 7d.. I would like also to say that ho return from rent or from any "ther source in connection with the P'opeities which have come into tho jink's hands and are unrealised is ever Men to the Bank's profit account, ""very such source of revenue is applied to u-riro down individually the amount the Property Rtands at in the Bank's books Jjntil realisation or extinction of the debt. *««firft liai of such properties in the Mftk? hands sent into the Tas ComrnisiM? r*hy ""'in "ccorriance with the Acb of |wl. amounted lo £52,925. Our list up to tan f' St pr" of tl"s year amoants to *wi*lß, and we are prepared to sell each *nc< every one of those properties ab the v?'« 8 set down in thab liafc. Under the circumstances, such results cannot bub command your appreciation, bub you may naturally ask i.i the face of them why would this proposal to amalgamate have wen made? The fact is thab the late banking crisis in Auatralia, and iv fcbe difficulties wetting the Bank of New Zealand, have ">rowo suspicion on all Banks, and tho ™«rt prudently conducted have had to !»ne.r from faults not their own. Ib was feseen tbab fhe State assistance given to "iftbftnk of New Zealand mighb detriment«'ly nffect this Bank, unless a portion of ™c ijovernmont operative accounts were v!t Di tn ÜBl Basides this, owing to the "Widraival of deposits, accommodation to emtomera has had to be curtailed, tbe wning power of the Bank thereby ?° lng lessened. Ko new business has tii!" • n up for some considerable "me, indeed some hundreds of thonsands l« n Pi°? ndß of the b°Bb business in New ZeaWTi tbeen offered t0 us and declined, '""Ply because we havo had to pursue a ilßhh)rVative courea' Ifc behoves the pru™»to look beyond our own colony and °2^ the possibilities in the financial X There i 3 no good dUgaißiße the iari-ii -an augmentation of the bank's

employed in increasing and consolidating our valuable business. While we were considering the state of affairs just referred to, ib was suggested thab an amalgamation of the two banks was possible and desirable. This proposal we, after serious and prolonged consideration, resolved to recommend to you in the form of the scheme submitted to the Government, in which we believed that our shareholders' interests were conserved in every possible way, and, although the present attitude of the Government may prevent us from seeking to carry ib out, ib is now ou record, and seeing the position the Government occupy wibh the Bank of New Zealand, time will determine whether the proposals made were nob only in the interests of bhe shareholders of both banks, but those of the public, and were such as would have freed tbe colony from the position of embarrassment which its recently-assumed responsibilities seem to be likely to entail upon ib. The story is a long ono, bub I hope ib has not wearied you. Tho attitude now taken by the Government in regard to the scheme renders ib impossible for us to invito you fco express your approval on this occasion. The following correspondence (already published), Bhows the position of matters ab tbe present moments You will see that we have virtually withdrawn from the negotiations for two reasons:—First, because we cannot permib our shareholders' ihtereats in any way to be adversely affected by the liquidation of the Assets Company, and secondly because the Government influence already provided for in the suggested agreement in the appointment of a president and auditors ought nob, in our opinion,. to be.incurred by direct representation on the Board, such direct interference with its ordinary business being likely to detrimentally affect the Bank and lead to the withdrawal of many of its mosb valued accounts. This latter point mighb possibly havo been modified by negotiation, for example, by such Governmonb nominee- being sworn to secrecy, bub the first stipulation was, in our opinion, fatal to the scheme. Mr Keith Ramsay, in seconding the motion, expressed the opinion thab the proposal for amalgamation was politically and morally wrong. He came bhero open to conviction, bub no reasons had beon adduced by the Chairman thab had in any way changed his opinion. Ho was glad, indeed, to see the Governmenb had issued an ultimatum which had practically pub a stop to all negotiations for amalgamation. They had no right to ask the State to bear their burdens, nor to take on itself their responsibilities. As shareholders they had no need to do so. He honestly thought the Colonial Bank occupied a strong position, and was never stronger than at present. Ib was quite capable of going alone, and he hoped thab ib would continue to take its fair share in prudently fostering the trade and commerce of the colony. Mr J. W. Bain, of Invercargill, in the course of a lengthy address, intimated he bad come there prepared to speak against, and cast a largo number of vobes againsb, amalgamation. The Bank of New Zealand mighb become the State Bank, bub the Colonial Bank would always be bhe people's Bank. He asserbs bhere waa a clearlydefined opinion among shareholders that there should be no further negotiations with the Bank of New Zealand unless the Banks were absolutely dissolved without delay from the Assot3 Company. (Mr Oliver: "Hear, hear.") Ho strongly urged thab bhero were good reaaons for the continued existence of bhe Colonial Bank, and if ib were the desire of the meeting ho would nob be adverse bo proposing thab no negotiations for amalgamation be continued, bub he did nob persevere with thab intention.

The motion for the adoption of the report was carried unanimously. Mr G. Brown proposed, and Mr J. Arkle seconded, votes of thanks and confidence in the directors, officers,' and staff, and in doing bo bobh strongly opposed amalgamation. / The motion was carried unanimously.

The Chairman in acknowledging the vote said he.had had some figures taken out to show shareholders the position of the Colonial Bank compared with thab of other banks in the colony. Tho shareholders would understand thab the figures were bhe capital and reserve fund pub bogebher, and taken in proportion to each bank's liabilities. The Bank of New South Wales proportion of capital and reserve fund to liabilities was 1348; the Union Bank, 12"18 ; tha Bank of Australasia, 1564 ; the Bank of New Zealand, 9 43 ; the Colonial Bank, 1733 (applause) ; and the National Bank, 12*31. Those figures were taken from their own published balance-sheets. If, said the Chairman, you take our position therefore as a matter of strength, we are the strongest Bank in the colony. (Hear, hear.)