A PROSPEROUS INSTITUTION.

Auckland Star, Volume LVII, Issue 134, 8 June 1926, Page 6

A PROSPEROUS INSTITUTION.

Despite restriction of trade and contraction in the value of exports, the Bank of New Zealand's annual report shows that the institution has again had a highly successful year, the net profit being £912,160. Additions to this include the balance carried forward from last year, £513,299, and £100,000 set nside to balance transfers of surplus funds from London, but not now required for this purpose, making a total of over a million and a-half available for distribution, of which £341,582 has already been paid out in dividends. The capital account has now passed the six millions mark, as a result of the £1,125,000 issued last year to provide for the loan to the Government for State Advances. The bank is thus in a position of great strength, its balances exceeding its capital, while beyond those are huge investments in gilt-edged securities, which are immediately available.

The State shares directly in the bank's great prosperity, and it has the first claim upon the profits. Under the Bank of New Zealand Act of 1020 the annual distribution up to £356,250 —the amount of the distribution in that year— is allocated first in payment to the Government of f50,000 (ten per cent on the preference A shares, held by the State) and the balance in proportions of one-seventh to the Government as dividend on the B preference shares, and six-sevenths to the ordinary shareholders. This proportion corresponds to the capital ratio of the two classes of shares prior to the rearrangement made in 1920. Distributions in excess of £356,250 are apportioned, one-third to the Government, and two-thirds to the ordinary shareholders, a proportion in correspondence with the prearranged capital ratio.

The State share in the profit is very considerable, and its association since it put its "guarantee behind the bank in 1894 at no cash cost to itself has been one of continuous and increasing advantage. It has been suggested, in view of the profits now being made by the Bank of New Zealand and other banking institutions, that they should pay some interest on balances of current accounts. The main object of such payments, of course, is to attract further business, and perhaps it is not deemed necessary to do this in a country where so many depositors open accounts with the ultimate intention of exceeding their deposits when they have proved their integrity and their business capacity. Still, the payment of interest, even at a very low rate, would undoubtedly attract further business and strengthen the ability of the banks to grant necessary advances to their clients. It is understood that some bankers favour this proposal, but complete agreement is necessary before it can operate. Meantime, the Bank of New Zealand is to be complimented upon a highly successful year.