MONTHLY SUMMARY

Auckland Star, Volume XXVI, Issue 212, 5 September 1895, Page 3

MONTHLY SUMMARY

(Continued from Page 8.)

The Bank of New Zealand Estates Company.

fflE KBPORT <0»F TUB JOINT

CCBiS-HHTTEE.

ESTATES COMPANY TO BE SEPARATED FROM THE BANK.

CALL OF £500,000 ON SHARE

HOLDERS,

)■ £500,000 SUBSCRIBED BY THE ; GOVERNMENT.

SHAREHOLDERS ALLOWED FIVE PER CENT. INTEREST ON NEW CALLS.

Wellington, August 28. The Joint Committee, consisting of eighteen members, appointed in equal numbers from both branches of the Legislature, appointed to inquira into the Bank of New Zealand Estates Company and its rel&tions to bhe Bank, brought up the following report: — REPORT. The Committee appointed to inquire into and report upon the Bank of New Zealand Estates Company, and its relation with tho Bank of New Zealand ; to inquira how in the colony's interest in the two institution can best be separated, and how the earning power of the Bank of Nov/ Zealand may be increased, Its stability insured, and its usefulness extended, have the honour to report as follows : Before proceeding to investigate the eevsral matters referred to it by both Booses of , Parliament your Committee received from the Colonial Treasurer the following letter addressed to him by the directors of the Bank of New Zealand, which explains why Parliament lias been calied upon to deal with the question. Bank of New Zealand, Wellington, August 17fch, 1595. Sir, —I have the honor to quote for your information bhe following minute pa?ssd by the Board of the Bank at a meeting held this morning :—Parliamentary Committee to inquire into the aliairs of the Bank of Now Zealand Estates Company and tho Bank of ISew Zealand with a view to separating the Estates Company from the Bantc and increasing the earning powers of the Bank. Resolved to place on record that it was the desire and expressed wish of the directors made at a conference with Ministers that this Committee of both Houses should be appointed. —I have, etc.,

W. Watson, President. The Hon. the Colonial Treasurer, Wellington.

Your Committee have.since their appointment, been continuously carefully engaged in going into the several matters referred to, and have had before them tho President of tho Bank, _r Watson, all the directors of the Bank of New Zealand, tho Auditor of the Bank, Mr Butt. Mr Foster, the General Manager of the Estates Co., Mr Lyon, until recently employed as manager of several of the properties of the Estates Company, Mr McKerrow, Land Purchase Inspector,and MrMcGowan', Commissioner of Texas. Your Committee have had before them balance sheets of Bank of New Zealand, balance-sheets of bhe Estates Company and of the Auckland Agricultural Company combined, balancesheets and statements concerning the business of the Bank and of the Assets Company, which are appended to the report.

Your Committee find that the presenb directors ot the Bank are not responsible for the present unsatisfactory condition ot adairs. The Committee consider that present directors have acted efficiently since they took office, and have candidly and fully given every information to the Committee.

There i 3 a deficiency of £376,900, and a contingent deficiency of £200,000 in'the bank. There is a depeudency of £467,077 in the Estates Company, against which no assets exist, and a further deficiency of £444.601 in trading concerns and properties outside New Zealand. These altogether amount to £1,488,578. Of this sum, £148,110 which, though shown as a liability, is really a debt due by the Agricultural Company, ia represented by assets. Deducting this from the aforesaid sum of £1,488,57., there remains £1,340,468.

This is provided for as follows : —Capital of the Bank, £900,000 ; estimated amount of call, £450,000 ; total, £1,350,000, leaving a balance of £9,532, which goes to a dependency account.

Your Committee are of opinion thab in the present financial circumstances of the colony, and taking into consideration the" financial position of the Australian colonies, and also considering the magnitude of the interests, both public and private, which are involved, as wall aa the widespread disaster that would follow should the Bank be compelled to suspend operations, the colony should render such assistance to the Bank as will i—tore confidence, insure stability and enable it to carry on its business in a satisfactory and profitable manner.

The Committee ia of opinion thab any asgirt.nee should be of an effective and definite character.

in 3upport of the Commibbee's opinion, ib may be sbated that it has found bhat, apart from any indirect injury to tho country, the following interests would te directly affected by any disaabor to the Bank :

As will be seen from returns annexijd, there were on the Slab March, 1895, in Nov/ Zealand and the other colonies and in London, deposits in the Bank of New Zealand to the number and amount as follows :—New Zealand, 35,110 depositors, representing £5,032,900 : other coloniep, 2,839, £530,223 ; London, 3,351, £1,578,632; totals, 41,300 depositors, £7,141,755. This includes Government deposits amounting to l

Tho total number of advances by tho Bank on tho • 31st March, 1895, and the amounb of the same in New Zealand and other colonies and in London, were as follows: New Zealand 15,593 advances, amounting to £5.428,222; other colonies, 1,277, £1,-3,516 ; London, 137, £300,915. Total, 17.C07, £7,192,653,

Tho shareholders in New Zealand number J. 050, liable for £403,000. There are one hundred and fifteen branch banks and 28,584 current accounts. The discount account representing traders' acceptances equil* £456,000.

The colony of New Zealand, independently of the "A ,: stock £2,000,000, and remittances in transitu, is a creditor to the Bank for £1,403,000, the amount in Nw Zealand being £458,000, and in London £945,000.

- loin the.evidence taken, and bhe balance shoots submitted, it will be found tbab bhe Bank of New Zealand and Estates Co. though two in name are practically one institution ; that the Estates Company and the Auckland Agricultural Company, though under efferent name*, are practically oneconcern; anfl than the Combined Estates Company, •Auckland Agricultural Company, and Bank or ,\<nv Zealand are practically one concern. "'he division is in name only, because thf whole of 11:9 shares in the Estates Company are owned by the Bank of New ,/kaiand, the only interest held outside

bhe Bank being the debenture-holders who recently acquired £500,000 worth of the debentures previously held by Baron Schroder, and the debenture holders of the Auckland Agricultural Company, who hold £282,960 worth of debentures). Your Committee is of opinion that it would be in the besb interests of the colony of bhe _ shareholders of the Bank of New Zealand, and of all concerned, that a separation of the affairs of the Bank of New Zealand and the Estates Company should take place. In dealing with so momentous and intricate a question, it is necessary thab every precaution should be taken to safeguard the colony against losses, and to render future application for the intervention of Parliament unnecessary. To effecb bhis your Committee recommend thab the whole of bhe freeholds, leaseholds, stations, stocks, and implements in New Zealand be disposed of, and that bho Bank of New Zealand and the Estates Company sell bhom to a Realisation Board bo be established for thab purpose. That an Assets Realisation Board, consisting of three members, be created, as hereinafter provided. That the Assets Realisation Board be authorised to issue bonds for £2,734,000, bearing 3& per cent, interest, and that the deficiency, if any, on these bonds, after the realisation of the New Zealand Estates Company's properties, be guaranteed by the colony to the Bank. In return for these the Bank of New Zealand, the New Zealand Estates Co. and the Auckland Agricultural Co. to transfer the whole of the property referred to the Realisation Board for liquidation purposes. That £500,000 of the uncalled reserve liability of the Bank of New Zealand shareholders be called in four equal instalments, the first being payable on the 30th June, 1896; the second on the 31st December, 1896; the third on the 30th June, 1897 ; and the fourth on the 31sb December, 1897. Thab, to encourage the shareholders of the Bank to meet the call of £500,000 proposed to be made, your Committee recommend that the first) charge on all annual profits of the Bank beyond £50,000 per annum, should be a payment oE interest nob exceeding 5 per cent, on the amount paid by shareholders on the call as aforesaid. \ Thab the Bank of New Zealand, oub of its profits, pay to the Assets Realisation Board the sum of £50,000 per annum, as hereinbefore mentioned, and any further sum which may remain after paying 5 per eont. to ordinary shareholders, until any deficit on realisation is provided for. Your Committee are of opinion that the last valuations of stations and landed pro perfcy may, under favourable circumstances, be maintained, bub the more prudenbeourse would be to allow for further depreciation. That, bo insure the colony againsb any loss on account ol guaranteeing any deficiency that may arise on bonds (in addition to the payments from profits above provided for), security be given over the freeholds, leaseholds, stations, stock and implements in New Zealand, the Bank's latesb ascertained value of which is £1,879,000, and over the second call of £500,000, and also over the balance of £500,000 of the uncalled reserve liability of the Bank shareholders.

Thab the firsb call, the last payment of which is due on the 26bh November next (estimated to amount to £450,000), together with the present paid up capital, amounting to £900,000, be written off, to provide for losses, of which £1,150,000 is for ascertained losses, and includes £9,558, which is proposed to be held as a dependency, and £200,000 as contingency for unascertained loss.

In conjunction with the proposal, and to enable adequate capital to be provided for the Bank to carryon its business and restore its credit, your Committee recommend the colony to subscribe £500,000 for preferential Bhares bearing 3i per cent, interest, and that they be paid for by tho issue of 3_ per cent, stock to the Bank, the BaDk to have the right to purchase any or all of those shares, provided they are sold, present Bank shareholders to have priority.

This, with £500,000 of capital from the second call of reserve liability, will give the Bank of New Zealand a clear capital of £1,000,000 sterling.

In addition to this, bhe position of the Bank will be strengthened by having bhe whole of the £1,000,000 of "A" stock for use in its ordinary business, under the altered position thab the Bank will occupy. These proposals, if given effecb bo, will pub ib on a sound basis.

On investigation your Committee ascertained that the second million of "A "stock, now invested according to law in liquid securities, entails a heavy annual loss on the Bank. To prevent this recurring loss, and in order to incroaae the earning power of tho Bank, your Committee recommend that the million be freed, and made available for use in tho Bank's general business, and bo further enable the Bank to increase its earning power, your Committee are of opinion that the Bank should be at liberty, if deemed advisable, to secure further trade by purchasing other banking business, bub that no purchase be allowed unless with the sanction of the Governor-in-Council, and that, to enable this to be done, section 3 of the Banking Act 1594 bo repealed, and, further, with a view of increasing the earning powers of bhe Bank the Committee recommend bhat bhe colony's business in England be transacted by the Bank of New Zealand. The directors of the Bank are of opinion thab if these recommendations bo given eflecb to bho nob earning power of the Bank will bo so increased as to leave a profit of £135,000 per annum.

That in consideration of the £500,000 preferred shares to be taken up by the Government the colony should have further representation, and thab Governor-in-Council be empowered to appoinb one director.

Thab the Assets Realisation Board shall consisb of three members, and inasmuch as the colony haa guaranteed the deficiency of any on bhe bonds to be issued by the said Board bhe Governor-in-Council shall appoint two members, and the Directors of the Bank of New Zealand one member.

The Commibbee are of opinion that shareholders of bho Bank should bo prohibited by law from winding up the Bank until bhe whole of the obligations bo the colony are repaid. This is an obvious precaution considering the large responsibilities of the Bank to the colony, and the Committeo also recommend thab power under the Bank Guarantee Act, 1894, be amended so bhab power to appoinb a receiver shall arise on any default of bhe Bank. The proposals of bhe Commibbee deal only with the landed properbies, sbations, stock, implements, etc., in New Zealand. The trading concerns both in and outside New Zealand, and the properties owned by the Estates Company outside New Zealand, are not to be transferred to bhe Asseba Realisation Board. The Directors of the Bank of New Zealand have informed the Committee thab all those various properties may be realised in two years. The Directors have so far written down in value thab bhe Commibbee is of opinion bhab there need be no delay in carrying out those immediate realisations. The details of the trading concerns have nob been appended as they are for sale and ib would be inadvisable to furnish all the details connected with them. Wibh the papers appended to report will be found a scheme submitted by the directors of the Bank of New Zealand. The Committee did nob see its way bo accepb ib, seeing thab ib entailed heavy obligations upon bhe colony which thecircumstanceaof thecasedid not warrant. The Colonial Treasurer submitted a scheme, a distinct feature of which was

thab tho colony did not directly issue stock to the Bank as againsb bhe assets of the Estates Company, but in lieu thereof as a lasb resource the colony guaranteed the deficiency only on realisation. Sir Roberb Stoub also placed before the Committee certain resolutions. These will be found with the papers appended to thereporb.—Chas. C. Bowen, Chairman.