BANK OF NEW ZEALAND.

Auckland Star, Volume XXXIX, Issue 153, 27 June 1908, Page 8

BANK OF NEW ZEALAND.

ANNUAL MEETING. THE CHAIRMAN'S SPEECH. (By Telegraph.—Own Correspondent.) WELLINGTON, Friday. The annua] meeting of shareholders of the Bank. of New Zealand was held at three o'clock this afternoon. About 30 were present. Mr. H. Beauehamp, chairmam of directors, in moving the adoption of the report and balance-sheet, said: — I have much pleasure in again placing before shareholders so satisfactory a report and balance-sheet as that recently distributed among you. Following our usual custom, I propose, in the first place, to refer briefly to the items in the balance-sheet in which there is any considerable variation.

A comparison of the figures with those of a year ago gives the following results;—

Capital. —There is no alteration in the capital of the bank, which still stands at £2,000,000. The Reserve Fund.—The amount at credit of this fund, after crediting the sum allocated from last year's profits, was £250,000; and in pursuance of the policy indicated at the last annual meeting, "the directors have again allocated a considerable amount from the profits of the year towards this important fund. The amount proposed to be transferred not of the profits at 31st Marcn last is £200,000, bringing the reserve fund up to £450,000. With the balance proposed to be carried forward after payment of dividend and other appropriations, the reserve fund and undivided profits will amount to £504,097. Notes in circulation are less by £52,----563, but still stand at the satisfactory sum of £012,627. EXPANSION OF DEPOSIT BUSINESS. (Deposits. —There has been a gradual expansion in the deposit business of the ■bank during the year, although the increase is not so marked as that recorded for the corresponding period. Current accounts and fixed deposits together show an increase of over £400,000 for the year, while on the other hand New Zealand Government credit 'balances are considerably less than at March, 1907, causing a net decrease of £137,747 to be shown in the aggregate. . Fixed deposit rates were during the latter part of the year raised one-half per cent, which will probably have the effect of still further augmenting the deposits of the bank. Bills payable and other liabilities show a d-*rease of £356,138, mainly in bills payable, due to fluctuations in Government operations. ASSETS.

Turning to the assets side, coin, bullion, money at short call, etc., show a considerable movement on last year's figures. We have increased our holding of coin by £-355,355, and the item coin ami cash balamces now stands at £2,----445,993. Bullion is less by £29,688. Money at short call, Government and other securities in London, are together less by £1,684,682. For the last few years we have had more than the normal amount of our surplus funds invested in short loams and other liquid securities in London. During last year, however, the demand for money in New Zealand was active, and we were able to increase our advances here at rates distinctly better than those obtainable in London. The policy of the bank in keeping large funds in London has frequently been questioned, but your directors hold that it is most; desirable to maintain a position, of strong finance in that city to meet the exigencies of the large and increasing business of the bank. As has ibeen frequently pointed out in the. past, our "surplus" funds can be profitably •utilised in Londoin, and by reason of the liquid nature of their investment they are readily available for use in the Dominion when required.

Bills receivable in London, and in ■transit, stand at £.1,844,440. Previously •the item "bills receivable" in our bal-ance-sheet included only bills receivable actually in London, all other bills in .transit being included among ■ bills discounted. It has been cojnsidered advisable to now include bills in transit to London with bills receivable held there. This gives the more appropriate classification, and our balance-sheet will then, in this respect, be on the same lines as those of other banks doing business in tile-Dominion.

- - Investments in tie colonies are greater Iby £95,455, and now stand at £1,123,295.

""Advances. —After making allowance .for adjustment of bills purchased in 'ifcrairsft, discounted bills show a slight reduction on last year's figures, whilst advances show an increase of over '£'.1,926,000, making the total under the heading of current- account advances and other debts due to the bank, !-£8,350,619, as appearing in the balancesheet. Since the beguuiing of the year a certain amount of stringency has been experienced in the local money market, and rates for advances have hardened considerably. There is still an active demand for money within the Dominion, and the position is accentuated by the recent fall in the price of wool and flax, causing farmers and others engaged in commercial pursuits to lean more heavily on banks and commercial institutions. The bank in the circumstances is pursuing a conservative policy in the matter of advances-at the present time, the aim of the directors being to meet the legitimate requirements of our own customers. With regard to our advances, I can ibut repeat the assuran.-i-s given to you on former occasions that the greatest care is best-owed upon this important branch of the business by your directors and the executive officers of the bank.

Assets Realisation Board Assets.—The policy indicated in my address to you in June, 1907, viz., to quit the dependencies taken over from the Assets Realisation Board at best prices obtainable with the least possible delay, has been vigorously carried out during the past year. At 31st March last these assets stood in the books of the bank at £471,235, a decrease of £286,964 om the figures at 31st March, 1907.

A reduction of £394,677 has been effected since -these assets were taken over in 1906, and I think you will agree with

mc that this result may he regarded as highly satisfactory. We are continuing our efforts to realise the remaining properties still in our hands, and will take advantage of any - reasonable opportunities of disposing of them. Landed property and premises stand, after appropriation now made of £20,000, at £321,853, a slight increase on last year's figures. PROFIT AND LOSS. After making all necessary appro-' priations, the balance of net profit for the year amounts to £309,922, as against £294,880 last year. To this has to be added the balance brought forward from last year, £31,675, making the total available for distribution £341,597—a result that must be regarded as extremely gratifying. An interim dividend of 5 per cent has already been paid to holders of ordinary shares, and in respect of the preference shares issued to the Crown. The directors now propose to pay a further dividend of 5 per cent on the ordinary shares and 2A per cent on the preference share capital. The total distribution by way of dividend is thus £87,500. Of the balance remaining it is proposed to transfer £200,000 to the Reserve Fund, and to carry forward a balance of £54,097. THE PROVIDENT FUND". "Speaking of the Provident Fund last j year I have to remark that, to place it | upon a better financial basis, the Board, ' think it should, from time to time, as circumstances permit, be strengthened Dy contributions over and above the regular annual donation given for some years by the Bank. It is thought, also, that an effort should be made jo increase the minimum and perhaps the maximum —but especially the minimum—pensions payable to officers upon retirement. To ascertain how the fund stands at this period of its existence, full information has been transmitted to a leading actuary in London; and, upon .receipt of his report, the Board will then consider what steps it will be desirable to take to improve the position and capabilities of the fund. "Well, gentlemen, we received, in due course, the report of the London actuary ; and, after the fullest consideration, it was decided to adopt one of his recommendations. This necessitated our setting aside the sum of £5669, or, say, £1331 less than the amount you voted to the fund by way of a "refresher," so to speak, in 1907. Now, seeing that our net profits as shown in the balance-sheet for the pasc financial year, after providing for the sum of £5669, are greater by £ 19,041 than they were in the year immediately preceding it, I feel satisfied that you will not demur to the action of the Board in respect to this matter. It is the intention of the Board, whilst the conditions of the Bank permit, to make a similar payment to the fund each year. THE AMERICAN CRISIS. Since I met you this time last year, there has, unfortunately, occurred a very great change in the economic and commercial conditions of the world. The financial crisis that convulsed the United States in October-December last had far-reach-ing effects, which we in New Zealand are feeling to a certain extent. There has been a marked fall in the values of the majority of our staple products, notably wool, tallow, hemp, kauri gum, and frozen meat (with the exception of lamb), due to the financial stringency in New York reacting on London, Paris, and Berlin, and causing money in these centres _to advance to prohibitive .and trade-paralysing rates. The appreciable lessening of industrial activity in the United Kingdom—which was a direct result of the financial panic—affected the values of our products. Wool has suffered severely, but the tone of the May sales was encouraging and gives hopes of an early revival.

To turn to a brighter side of the picture, it is satisfactory to note the splendid prices obtained for butter and cheese during the past season. In the matter of price, butter established a record, several consignments realising from 140/- to .152/- per cwt in Tooleystreet. These prices equalled, if they did not exceed, those made for the best Danish, which, heretofore, occupied "pride of place."

The fall in the values of our principal staples exported shows a shrinkage which is most marked. The total values of our exports, exclusive of specie, for i each of the past five years ending 31st March compare as under:—l9o4, £15,----1301,209; 1905, £15.520,903; 1906, £16,----247,212; 1907, £19,434.658; 1908, £17,---563,842. Thus, after a series of increases, there has come a check, the decrease of 1908 as compared with the previous year amounting to £1,570,816. The declension will be more clearly emphasised when the true trading year—that Is, j 30th September—is completed. The j lower prices of produce naturally affect land values, for, after all, land is only worth according to what it will yield, i and must fluctuate with the rise and fall of the primary products. Building land has, no doubt, been raised to fictitious values, and a sharp drop in thaJ description will not be altogether an evil. For farming land there continues to be an excellent demand, but it is not unlikely that values of rural lands will recede somewhat in the near future owing to the fall in the prices of commodities, and also to th-j probability that considerable additional areas will be marketed through the effects of the high graduated land "taxes which are to become operative presently, and which were designed to bring about the dispersal of big estates. Moreover, it is confidently -anticipated that, as the result of the Native Land Commission now sitting, very large blocks of land, especially in the Auckland provincial district, which up to the present have been lying waste, will be available for selection by intending settlers in the near future

With the sharp decline that has occurred in the value of wool (which is now lower than it has been since 1901----2) the outlook of the Dominion of New Zealand is not so rosy as it was when I addressed you on a similar occasion in 1907. We are experiencing a setback; but, having regard to the prosperity we have enjoyed for the past ten or twelve years, and the national and individual wealth which has accumulated during the years of plenty, there is little doubt that the community can stand the slight business check we have met without trepidation. AN ENCOTJRAGrsrG OUTLOOK. After quoting Post-office Savings Bank returns, and figures relating to publk and private wealth, mortgages, manufacturing and population, the Chairman proceeded. These figures, I think, prove conclusively that i am not unduly opthnißtic when I say that at no period of out history were we better situated than we are to-day to face a set-back in the prosperity we have enjoyed dnring the

last few years. I am no prophet, but I believe that its duration wall not be so long as some anticipate. If we turn to America (where the- commercial setback had its origin), we have a reassuring report from Mr Seymour Bell, the British Agent in the United states, who points out that the panic there was entirely financial, and though it caused for the time being a widespread diminution of trade and industry, still goods were not thrown upon the market at ruinous prices, and there has .been a prompt and effective cheek imposed upon production. Above all, it has to be considered that the farmers, who still form the backbone of American prosperity,, have been very little affected. The pro-' sperity of this class is exceedingly great, and a country that produces crops valued .at one thousand five hundred million pounds sterling (£1,500,000,000) is unlikely to suffer long from industrial de pression Of course, the Presidential electron this year will cause a disturb- , ance; but, on the other hand, the Great Republic is promised a bumper harvest' next month.

The Bank of England discount rate is nww 2$ per cent, or only a i per cent above the traditional -minimum. This cheapening of money iv Conaon has already had an excellent effect in stimulating investment in gilt-edged securities. In New York, according to recent mail advices, call money was at Ig per cent. In European capitals, the tendency of the money markets is downwards. Cheap money must inevitably exercise a beneficial influence on trade and commerce.

I do not wish to be misunderstood. While I believe there is little justification .for the assumption that the check we are experiencing will last long, still, with a less buoyant commercial barometer, it is obrious that caution should be our watchword, and this policy should, in my opinion, be adopted by some business houses who, in re cent years, have been overtrading and somewhat indiscriminate in the giving of credit; by farmers who have been, and are, paying excessive prices for land — both freehold and leasehold —and by others, who, with little regard to the future, have been living at an extravagant rate.

Board of Directors.—Mr F. de C. Malet, in consequence of ill-health, resigned his position as a. Director on 31st March last, and the Government was pleased to appoint Mr James Bennie Keid in succession to that gentleman. Mr Malet was connected with the Bank for slightly over nine years, and for just over five years carried out the reponsible duties of Chairman—to the complete satisfaction of his colleagues and with much advantage to the Bank. Mr Martin Kennedy returned to the Dominion in December i-ast. During nis residence in London, he was associated with our Board in that City; this afforded him an opportunity of gaining a good insight into the ramifications of our extensive business at that point. We are much indebted to the members of the London Board for the care and discrimination they exercise in the conduct of our business. APPRECIATION OF SERVICES. It again affords mc much pleasure to record my colleagues' and my own appreciation of the valuable services accorded to the Bank during the past, year by the London, Australian, Fiji, and New Zealand staff. To Mr William Cullender, your and our thanks are especially due fox the able and conscientious manner in which he has discharged the onerous duties of General Manager. In a prac tical manner the Board have recognise* the staff's good work by paying them a bonus of 5 per cent upon all salaries.

I now formally move the adoption of the Report and Balance-sheet. % this be carried, the dividends proposed — namely, 2J per cent on the P/eference Shares, making 7 J per cent for the year, and 5 per cent on th* Ordinary Shares, equal to 10 per ce»t for the same period—will be payabJJ in Wellington on Monday, 29th instait, and at the Branches upon receipt of advice. MR. WATSON'S SPEECH. Mr W. Watson, in seconding the motion, 6aid—"When I first became connected with the Bark of New Zealand in 1894 it was my unpleasant duty to report to the the-i Colonial Treasurer, that, out of £11000,000 of the Bank's so-called assets, fcss than one-half were profit-earning, while interest or its equivalent was beiig paid on deposits and other moneys aggregating no less than j £6,366,000. This statement, without going into ftfther details, will suffice to make clear to you what an up-hill battle has been (ought to obtain the position occupied io-day. In the balance-sheet now before you there are profit-earning assets amounting to over £15,000.000 all sound And good, against interest-bearing liabiliiies of about £8,000,000. It is perhaps needless to say that in 1894, although the good will was of great prospective value, the bank was making no profit at all; now, after liberal prowsiuiis, the net profit for the year ended 51st March, 190S, is £309,922. Shareholders of 1894 will naturally say—"lt is a splendid result for the bank, but by ,our heavy contributions, we helped to bring it about, yet where do we come in, for we went for years without any return at all, and even now we receive only two per cent, on the money we contributed. I say that I firmly believe you will not have much longer to wait before receiving a more adequate return. The other banks doing business in the Dominion have reserve funds in proportion to their liabilities which cast our reserve fund somewhat in the shade, but ours is mounting up very handsomely, and if we are able to add substantially to it next year, as well as pay increased dividends, I should advocate that course. Then there is the question of probable increases of capital in the future. The banking business of the Dominion must go on increasing, and there is every reason to believe that this bank will maintain its ratio in the increase. More capital will be required to balance the greater responsibilities, and shareholders should then have the opportunity of investing profitably, or transferring their optidns at a premium. There should be no doubt that your rights will be respected both as regards capital and dividends. The Right Hon. the Prime Minister, speaking in Parliament last year, pointed out clearly that the ordinary shareholders' rights in the bank and its goodwill were paramount.

It has been urged upon mc by prominent shareholders that the majority do not fully comprehend the position as between the Government and the ordinary shareholders, and that I should make it clear on this occasion. Briefly it is this:—The Government own 75,000 preference shares of £6 13/4 each, fully paid-up, and the ordinary shareholders own 150,000 ordinary shares, also of £6 13/4 each, but having £3 6/9 paid up. Dividends are arranged on a sliding scale, so that, when dividends higher than five per cent, are paid, the ordinary shares bear double increase to the pre-

ference shares; thus if fifteen per cent, were paid on ordinary shares, ten per cent, would be the rate on the prefer : ence shares, but by special limit ten per cent, is the maximum rate for them, whereas, the rate on ordinary shares is unlimited as in any other bank. The Government guarantee £1,000,000 stock issued by the Bank in London, and due to be-repaid on 19th July, 1914. On the Board of the Bank the Government have at. present four nominees, and two members are elected by the ordinary shareholders. The Government appoint the Chief Auditor, and the Governor-in-Council may veto any resolution passed by the shareholders. It will therefore be seen that the Government's interests, are more than amply safeguarded. When the" guaranteed stock is paid off, it is reasonable to suppose that the shareholders will have representation somewhat more in accordance with their larger interests in the bank?. Indeed, for my own part—and I know that Mr Kennedy agrees with me—l think that in fairness and justice the shareholders should even now have a greater say in the affairs of the Bank, which is principally their own institution, although we recognise that the Government should have efficient checks, and fair representation on the Directorate. In accordance with the Act of Parliament, I am the next to retire from the Board by rotation, and again I shall offer myself for re-election at the hands >of the shareholders. I would ask those who consider that I have served them well for the past fourteen years to kindly give mc proof of their apprecition by not forgetting to record their votes for mc when the voting papers reach them. SHAREHOLDERS' REPRESENTATION. Mr Kebbell thought that they should pay a little more attention to small depositors. The Government had raised the interest on Post Office Savings Banks deposits by J per cent., and had the bank raised its rate to 3i per cent, it would have had. a fair share of these deposits.

Mr Martin Kennedy said that the dividend provided in the balance-sheet represented only 28 per cent, of the profits, as against 60 to 70 par cent, paid by other banks. If als per cent, dividend wab payable on the present face value of the shares, it would only give 5 per cent, on their actual cost. He hoped the time was noi far distant when shareholders would have a more equitable representation on the. Board. When the present basis of representation wa» fixed, it was reasonable, for then the Government guarantee amounted to about £5,000,000, whereas to-day it was reduced to £1,000,000. A motion to increase the remuneration to the directors was -withdrawn it oeing explained that the directr*'* did not desire higher remuneration The report was unanimously and votes of thanks were passe* to ths j chairman, the directors, the manager, and the staff.

Mr Beauchamp acknov'eiiged the vote of thanks on behalf <v the directors.