BANK MEETING.

Auckland Star, Volume LIV, Issue 141, 15 June 1923, Page 7

BANK MEETING.

NEW ZEALANDSHAREH.OLDERS SPEECH BY CHAIRMAN. A PROFITABLE YEAR. (By Telegraph.— Own Correspondent.) WELLINGTON, this day. inn? fT 1 ffleetin g °f shareholders tod»v k „° f New Zealand was held \,Zl\. 1T G ? or S e Elliot - chairman of 'S3 P re , slded - The directors' report and balance -sheet (already published) were adopted. j Sir George Elliot, in moving the adoption of the report, stated that it was proposed to pay the same rate of dividend as in the preceding year. He said: Compared with the two previous years, last year shows a considerable fallingoff in profit. This is accounted for chiefly by loss of interest consequent on the reduction during the past year of over three millions, in our advances within the Dominion; by reduction, too, since the Jvew Year, in the rate of interest charged upon our best accounts, and by the lower rates obtained for a large proportion of our funds in London. The large amount of funds that we have thought fit to hold outside the Dominion has often been the subject of unfavourable criticism, but the wisdom of our policy was proved during the finan- ! cial depression that set in towards the • end of 1920, when, by realising our London and Australian investments, we j were able with comparative ease to meet all legitimate demands made upon us. The policy of the board is to maintain a position of great strength and never to subordinate safety to profit. To this end we keep a large portion of our resources in a readily realisable form, even though by so doing our profits sufi fer. Income tax in Great Britain, Australia and the Dominion has been reduced; but, on the other hand, we have found it necessary to make considerable provision for possible losses almost all of which are in respect of our large rural business." After pointing to the fact that the addition of £150,000 to the Reserve Fund would bring the fund up to £1,825,----000, and that the balance of £421,957 carried forward was more than sufficient to pay a dividend, the chairman went on to speak in appreciative terms oi the services of. the London Board and the bank staff. With regard to the latter, the board had granted bonuses to all the members, with the exception of the junior unmarried men. These junior officers receive yearly increases on a fixed scale until £270 per annum is reached; moreover, those who show marked ability are given a higher rate of pay than is provided by the scale. A permanent memorial to the 71 members of the staff who lost their lives in the War had now been unveiled in the Wellington Banking Chamber. Out of a total staff of 1006, no fewer than 561 joined up for active service, of whom 71 were killed and 136 wounded. The excess of exports over imports from the Dominion had caused an accumulation of the bank's funds in London in. excess of requirements, and the surplus could not be transferred to New Zealand except at heavy loss. Under these conditions exporters must expect to pay a high rate of exchange, while importers were enjoying very low rates. Unfortunately for the bank a very low rate of interest is now current.in London, the average return for the last year being only £1 18/3 per cent on the short loans, and £2 5/9 per cent on tho Treasury Bills less 4/6 in the £ for Imperial income tax. j DEPOSITS AND ADVANCES. I The bank deposits showed a satisfactory increase of £1.327,323. The adivances within the Dominion, which in 11921 reached uncomfortably high figures, show a decline of £3,511,000 for | t ! i" oast year. The reduction was due i chiefly to repayment of the exceptional advances made to traders during the period of over-importation in 1920-1921 and to the improved returns received for their produce by our substantial farmi ing customers. But a considerable portion of the advances is still of a somewhat unliquid nature. These, however, had been >crutiniseel with the greatest care, and the board is satisfied that, so far as it is humanly possible to judge, the most ample provision has been made I for all probable and prospective losses. I CONDITIONS IN THE DOMINION. j The imports into New Zealand during I the year an increase over the figI ures for 1921-2, but the exports show a still larger increase of £1,74G,374, so | that, on the whole, the balance of ex- ! ternal trade is in favour of New Zealand to the amount of £8,573,117. ! The substantial surplus of £1,315,- ---| 683 in the Dominion's revenue over ex- ■ penditure is also a matter for congratulation. Notwithstanding this, the people of the country should not be misled I into supposing that the necessity for a I maximum of economy in both public I and private expenditure ha 3 passed ; away. Conditions all the world over are far too unsettled to warrant the as- | sumption that the present price of com- ! modities will be maintained. The num--1 ber of bankruptcies during last year has been larger than usual. Numbers of farmers —many of them returned soldiers deserving the best of fortune—have also been obliged to surrender their holdings, thus losing all their hard won savings. ; In other cases, vendors have cancelled la proportion of the purchase money to j induce purchasers to carry on. In most I branches of wholesale trade heavy losses ] have been made, but, for the most part, j they have been faced with 'a surprising ' equanimity and with a determination to •profit by the lesson. The financial storm 'passed lightly over the retail traders. | THE MONEY MARKET. In London gilt-edged securities have risen steadily, loan issues of governments land local bodies have almost invariably ibeen fully or over-subscribed. The' Bank ' of England rate of discount was lowered to 3 per cent in July last, and has remained at that figure to the present time. In the Dominion, Government and I local body debentures and shares in 'first-class Government stock companies ihave been the most favoured investment. Very little new money has been lent on mortgage at lower than 6i per cent. Last month the Government issued in London a 4 per cent loan of four millions at 92, which gives the investor a return of £5 1/1 per cent if the loan is I repaid in 1933, or £4 12/7 per cent if not repaid until 1943. During the next six years the Dominion haß about £13,000,000 of loans maturing in London, in addition to nearly £45,000,000 falling due in Australia and New Zealand. If we expect these loans to be renewed on advantageous terms, it is imperative that the present status of the Dominion on the London money market be maintained. To that end, Government loan expenditure should be confined to work that is essential, and the severest economy should be practised in all the Government departments. In j our opinion at this juncture any fur- j ther opening up of unoccupied land j

would be unwise, for there is already far more land in occupation than can Ibe profitably used by the holders. Sub- | division of large holdings into reasonably sized areas would permit of a large j increase in the number of producers I without expenditure by the Government |on additional roads, bridges and railways. | Local bodies have arranged loans during the year to the extent of several millions, a portion of which was raised ,in London, but the bulk in Australia or New Zealand, at rates varying from 5J | per cent to 6 per cent. I RATE OF INTEREST. I The minimum rate of interest on bank advances in the Dominion was reduced to 6J per cent on 3rd January last, -but ! the bank does not average that on the | whole of the advances in New Zealand. ilt had been found necessary in some cases to forego interest, in others to I make substantial concessions, the result | being that the average rate of interest earned had been adversely affected. It is still difficult to borrow on fixed mortjgage even on a 50 per cent margin, at I less than 6 J per cent, hence it must be (recognised that borrowing customers have little to complain of since they have | the advantage of paying on their daily balances only and not on the sum the bank engages to lend them. Comparison is sometimes made between lending rates I here and those ruling in London, but such comparison is absurd, conditions being entirely different. Australian rates certainly bear a close relation to ours, although banks in New Zealand are Bubject to a much higher income tax than they are in Australia. A reduction in interest on advances would involve a reduction in the interest on deposits, of which about £48,000,000 is held by the Post Office and Trustees Savings Banks, and the joint Stock Banks also hold interest-bearing deposits to the amount of about £17,000,000. TAXATION. Reference was made to the demand that Government and municipal trading enterprises should bear the same taxation as that levied on private enterprises. "The fact that banks, companies and private firms are so handicapped in competing with these Governmental or municipal trading concerns is unjust, and the higher the income tax, the greater the injustice." THE OUTLOOK. In conclusion, the chairman alluded to the uncertainty as to the future created by the disturbed condition of Europe, but he said that, as nearly 50 per cent of the banking business is transacted by the Bank of New Zealand an accurate estimate of the actual position of the country could be formed. This justified the expectation that the years to come will witness steady progress. Reports of Sir George Elliot's remarks on the moratorium, co-operation, agricultural banks, land values, and the dairy industry appear elsewhere.