BANK OF NEW ZEALAND.

Auckland Star, Volume XXVI, Issue 213, 6 September 1895, Page 4

BANK OF NEW ZEALAND.

ADJOURNED ANNUAL MEETING.

THE PRESIDENT'S SPEECH. %

» (BTTELESRAPH.—PRESS ASSOCIATION,)

v&^fia^^ol^^!. Wellington, this day. At the adjourned annual meeting of the Bank of New Zealand thia afternoon, the Preßident said :— " You have had the balance-sheet ot the Bank in your hands for the past week, and are doubtless aware of the full particulars of the Bank of New Zealand and the Banking Acb of 1895, which has jusb become law. Into the figures of the balance-sheet, I need hardly enter beyond Baying that ib is proposed now, in addibion to the entries required by the Acb, to write oft reserve fund £45,000, and balance '• of profit and loss account £385, bo as.to reduce the item " bad and doubtful debts" to £376,900, the amount to be written off aa provided by the Act. Aa many shareholders may nob see bhe Acb itself, or, although seeing ib, may nob be able bo apply its provisions to 1 the circumstances of tho Bank so as to form a correct conclusion, I take this opportunity of placing on record tbe provisions of bhe Acd, and bbc exact position in which it will leave the Bank. In the first place, then, the paid up capital of £900,000 and the proceeds of the call of £3 6a 8d per Bhare, payable this year, are written off. _ To replace these by way of capital the Government are to subscribe for £500,000, preferential shares bearing interest at the low rate of 3_ per cent. These shares may .be re - purchased by shareholders at par within the nexb six years. Shareholders are called upon to pay another £3 6a 8d per share in four half - yearly instalments beginning on tho 30th June nexb year, and ending on the 31sb December, 1897. Thia will be the share capital, and it ia stipulated that out of the neb annual profits of the Bank, afber paymonb of £50.000 to the Assets Board, 5 per cent, interest on these shares will go to shareholders for the present, and in the event of there being no deficiency remaining on account of properties removed from the Bank, the whole profitß of tbe institution will be payable to shareholders. In any event no further call can be made until after the 31st of December, 1898. The £1,000,000 invested according to the Bank of New Zealand Share Guarantee Act of 1894, is freed for use in the Bank's ordinary business. The Government appoints one director of the Bank, whilo the liability on the part of the colony subsists. The whole of the stations, stock and implements and other lauded properties in New Zealand, including the properties of the Auckland Agricultural Company and the Estates Company's shares in the Thames Valley Land Company, are be sold to a corporate body termed the Assets Realisation Board for the prico of £2,731,706, and such additional sum as may bo necessary to adjußt the accounts after the 31ab March. This sum represents book values of bhese properties, and this incubua in the assets of the Bank and bhe Esbabes Company will now be replaced by debentures of the Aaaets Board bearing 3_ per cent, inberesb, and having any deficiency upon them guaranteed by the colony. By this transaction the balancesheet of the Bank of New Zealand Estates Company will be reduced to email tigurea, and tho poaibion of the Company will be rendered thoroughly sound, while its liquidation and total extinction in a very abort time will be feaaible. The amount to be written off as bad in the books of the Estateß Company will be £467,100, against ' Which no assets exisb, and £296,300 to bring down remaining assets to proper realisable values.. .The present deficiency in aaaets to be taken over by bhe Assets Board is computed at £850,000.. With good econdmical management on the part of the Assets Realisation Board, and an increaae in the values of wool and other products, of which there' is every likelihood, this difficulty will fast bo made to disappear, and bho capital and goodwill of the Bank, which will now be very valuable, would be then the free property of shareholders in time. To secure the above deficiency the colony is to have a lien upon the shareholders' capital, and uncalled reserve liability. The Assets Board is to consisb of threo persons, two to be appointed by tbe Governmenb and one by the directors of the Bank. Power is given to the Bank to purchase the business of any other bank doing business within the scolony, but so that only the sound business of such bank shall be taken over, and that the selling Bank will havo to liquidate its own bad and (doubtful debts. Ib is estimated that by such a purchase the Bank of New Zealand will be enabled to pay shareholders regular dividends of 5 per cenb. per annum, and conbribute maberially bo bhe reduction of bhe deficiency of the Assets Realisation Board. The Act further provides that, whilst the liability of the colony exisßa, shareholders are nob to wind up or dissolve the Bank so as to cause a loss bo the colony, and the Government, through the President, have power of vetoing such proceedings as might be considered detrimental to tbe interests of the colony. These are tbe principal changes broughb aboub by bhe Act. Their effecb will be bo separate entirely from the Bank, and free tho creditors of the Bank from any risk attending the large mass of properties standing in the books ab nearly £3,000,000 of money, which have co weighed down the Bank during the paßb ten years. Had bhe directors of the Bank known when the Bank of New Zealand Estates Company Limited 'was incorporated, that the prices of wool and other ! produce would fall ao low as they have done they would probably never have incorporated the company ab all, but would have taken other measures ab bhab time. Had prices, f nob fallen it is probable bhat the" deficiency' with which we are now dealing would nob have been so serious as to warranb bhe present measures, I would aßk those whose first impulse would be to impute blame to consider whab the values of the property were ten years ago, and whab bhey are now, and to remember thab shareholders of nearly every important financial institution doing business principally in tho colony have sufiered severely, and in many instances have nob only had to pay calls, bub have complebely losb bhoir properties. On the 7tb of February laab in this place, I atated to you thab ib waa nob contemplated then any furbher amount of reserve liability should be called up. At that time we had probed into the affairs of the Bank, but were unable to ascertain the position of the Eatatea Company until the accounts of the head offico were received from London to the colony, and until we could Btrikea balance-sheet tor the year ending 31st March lasb. By the Share GuaranteoAct of 1894,. the directors and anditora of the Bank wore er.joined to treat the item of £1,850,000 shares in the Estates Company ab par value. On ascertaining the resulb of bhe working of the Estates Company for the year ending the 31st March last and on becoming aware of the whole actual position of the Estates Company and the Auckland Agricultural Company, it- was apparent that under tho system tbon existing the Estates Company was unable to pay in tereston its indebtedness to the Bank, and if the prices of produce did not rise very considerably yearly deficiencies would accrue which we should should not be justified in concealing from the shareholders. Had. we merely come to this meeting with tidings of deficits the credit of the Bank would be gone, and the Bank iteelt would soon follow it. We did not consider ibour duty to throw up our hands in such a way but we represented

the position to the Government, Parliament having already assisted the Bank by a guarantee of £2,000,000, and we asked for reasonable assistance in the interest both ot the colony and the shareholders. A Joint Committee of both Houses waa set up to inquire into the affairs of the Bank. This Committee, whilo being careful not to destroy tbe confidence of customers of the Bank by probing into individual accounts, made a most careful investigation of the general business and affairs of the Estates Company, and asked the directors to put forward their recommendationa aa to what should bo done to rehabilitate tho bank. Thereupon the directors recommended ;a scheme in most repacts, ■ similar -to thab subsequently adopted by the Committee in their reporb. The moat important alterations made by the Committee were, thab, instead of £1,000,000 preferential chares being subscribedi'or by bheGovernmenb.only £500,000 has been subscribed and tbab instead of shareholders having issued bo them deferred chares (which bhey . would _be able to deal with) in lieu of capibal wribben off and hypothecating the whole £6 13a 4d against any deficiency, on bhe Estates, the Committee reported thab there should be a call of £3 6a 8d per 'share to be burned inbo capibal, dividends on which are up to 5 per cent., after the payment of £50,000 per annum to the Asßeba Roaliaation Board, should, if earned, bo paid to shareholders, and that this capital, together with the remaining £3 6s 8d should bo secured to the colony for any deficiency on the aaeets realisation. Thus, had the direcbora recommendation been carried out no call mighb have boen necessary. We consider, however, bhat shareholders should be grabeful for whab the Committee recommended, and for what Parliament haa given effect to. ; Had the Bank been allowed to go into liquidation, shareholders would undoubtedly have had promptly to to pay the whole reserve liability, or as much of ib as bhey individually could. Now bhere is only one-half of bhe reserve liability to pay, and spreading the paymenba over two yeara commencing nine months hence will be agreeable to those who are nob in affluenb circumstances, while, both to them and to thoso who are rich, there is the consolation thab on these payments there is every probability of their getting 5 percent, interest, besides having, undor ' favourable circumatancee, the goodwill of an enhanced businees preserved to them. By the acb of the Legislature the position of the Bank as regards its creditors is rendered secure and stronger than thab of any institution doing business south of the equator, and, the position being now thoroughly ascertained, shareholders may well look forward with confidence and hope. The prospect of the colony, with which the Bank ia co much bound up are brig-hbening. Wool and other producta are advancing in price, and when it is taken into accounb that a penny per lb rise in wool alone will mean £12,000 per annum to the Assets Realisation Board, it will bo aeon how important any rise in the price must be. The active development of the mining industry which is taking place both at tho Thames and Coromandel districts, and on the West Coast of bhe South Island, cannob fail to enhance the profits of bhe Bank. ■