LEANING OH THE BANKS.

Auckland Star, Volume LXI, Issue 164, 14 July 1930, Page 4

LEANING OH THE BANKS.

LATEST RETURNS TELL STORY

BiG FALL IN EXPORTS

MORE ASSISTANCE NEEDED.

The returns for the June quarter present a very different position from that of a year ago. In the June quarter of last year, thanks to an excellent export season, there was an excess of deposits over advances of £9,644,683. This year, however, export values are much lower, and the drop in realisations from exports has not been accompanied by a corresponding reduction in imports, hence deposits are lower and advances higher than a year ago. Consequently advances ■are in excess of deposits in the average for tlie quarter by £315,124. This is a most unusual position for the time of year, as in the June quarter fluids are usually at their highest point, resultant on realisation coming in from the season's exports. With funds at such a low point now it is evident that they must go etill lower before the coming season's produce is sent forward to improve the position, and from July on till November there is usually a gradual drain on the. banks' funds, after which the position begins to improve again. This season some 150,000 bales of wool have been held back, which would normally have been realised on- and benefited the supply of funds by well over a million.

Following is a comparison of tlie main features of the latest returns, with those of three months ago, showing the movements in the last quarter:— 1930. 1930. i June, March, £ K Deposits, free ... 23,225,5(!4 23,905,822 Deposits, iixed .. . 30,5132,174 30,01)7,418 Deposits, Govt. .. 5.090,349 3,400,080 Note circulation . 0.433,205 (1,417,038 Coin and bullion . (!,7!J7,8(i4 (1,048,838 Discounts 1,188,090 1,03K,427 Advances 52,874.472 52.447,130 Free deposits have receded, but fixed show a further increase, but the two classes together have declined £255,202 in tlie quarter. Advances show further increase, and including discounts are heavier by £380,383. This makes a reduction in the banks' funds in the quarter of £641,58.-), which is an unusual movement for this time of the year. Government deposits show a good increase, while tlie metal holdings and circulation are also a little larger. _ The reduction in the supply of funds is due to low export prices, and the holding back of wool from shipment. Turning now to a comparison of the latest quarter, with the corresponding quarter of recent years, we get a better survey of the position. Deposits for the past five years compare as follows: — DEPOSITS. Juno Free. Fixed. Total. ouarte?. & & * 1930 23,225.SCI 30,522,174 • 53,748.038 1929 . 20,810,881 30,241,013 57,051,894 3 92.S . 25,357,145 27,580,988 52,947,133 1927 . 24,741,202 21,74!),104 40,490,300 192(1 '. 27,594,496 20,674,853 48,209,349 The total shows a uccrea.se of £3,303,856 on the high total of a year ago, but is still ahead of earlier years. The free class, however, has the lightest total for several years, and the banks have had to look more to the fixed deposits to provide funds for lending purposes. It will be seen that they have found full outlet for the employment of these funds, as advances are in excess of deposits. This shows the wisdom of the banks in raking interest rates to attract deposits, as otherwise they would have had insufficient funds for lending requirements, and it is likely to be some time yet before they have any spare surplus of funds available. Turning now to the advance, we see how fully these funds are being utilised at present. Following are the discounts and advances for the past five years: —

.J urn! Discounts. Advances. Total. quarter. & & & 1930 .1 188,090 52,874,472 54,003,102 1!)29 . 1,038,427 40,308,78-1 47,407,211 l<l2B .. 1.177,454 44.2-1!),501 45,420,955 I()''7 1 508 108 49.244,998 50,753,106 limi ..' i>2B 908 40,985,834 48,714,742

This shows that while deposits have decreased by over three millions in the year, advances have increased by £6,655,951. The change is due-to the drop in export values, chiefly of wool, and the amount of wool held back in the hope of prices improving, while on the other hand imports have not been reduced to meet tho decreased purchasing power. This-means there will have to be a period of readjustment in the balance of trade, and until that is brought about the supply of funds in the" banks will remain light. We still have some five months before the coining season's exports will relieve the, situation, and' during that time the banks will have further drain on their funds. The relationship of deposits and advances is the most interesting feature of these returns, and we compare them below for the past seven years:— lOxcess of •Tune Deposits. Advances. Deposits. Quarter. £ £ £ j 1930.. 53,748,038 54,063,102 *315,124 19''9 . 57,051,894 47,407.211 9,044,(183 1928 . . 515,047,133 45,42(1,955 7,520,178 1927.. 4(1,490,30(1 50,753,100*4,202,740 192(1.. 48,2(19,349 48,714,742 *445,393 1925 . . 51,4(13,635 48,035,770 7,527,805 1024 ... 47,029,312 43.885,580 3,743,720 * Excess of advances. This comparison shows that in the past year there has been a drain on the bunks' funds of .£9,959,807. However, the present position is much better than that of 1927, when the excess of advances was much heavier. A good export season and a restriction on importation would soon improve the situation, but in the meantime that period ■ of readjustment will have to be gone through, and funds will not be over plentiful with tlie banks. Following are the shares of the different banks in these deposits and advances:— Deposits. Advances. Bank?.. it £ Now Zealand 25,029,(147 24,399,720 Union 0.038.8R5 <i.l »r, •>.',<; New South Wales . 0,451,391 6,726,314 Australasia 5,091,000 4,9ite,W2 National 8,502.83(1 10,115,290 Commercial 1,044,279 1,003,804 Each bank shares in the decrease in deposits and increase in ' advances, and only two banks, the New Zealand and Australasia, have deposits in excess of their advances. The only other -items of general interest are the note circulation and metal holdings, which compare as follows:— Tune Note Coin and ouartcr. circulation. bullion. £••£'••■ 1030 G,433,2G5 6,707,684 1029 (5,547,872 7,217,367 1028 ~ 0,432,109 7,507,494 1027 0,587,002 ■ 7,884,842 1020 0,847,555 7,795,503 The note circulation fluctuates within comparatively narrow limits, and is at present somewhat low, which is probably due to business being quiet and conditions not' quite normally prosperous. Metal holdings show decrease owing to shipments having been made of gold that was not required here. The figures under review are the averages for the quarter. The latest figures available show that at June 16 last deposits totalled £53,082,601, and advances £53.268,677. leaving an excess of advances of £184,076. Banks Can Meet Needs. In view of tlie conditions that have prevailed for our exports, especially wool, in the season just closed, the present returns can only be considered as very satisfactory. Although, advances exceed deposits it is not a heavy surplus, and the banks are quite capable of meeting the situation, and could make further advances if necessary, which they will, no doubt, be called upon to do during the next few months. At this tune three years ago advances exceeded deposits , by nearly four millions more than >i/at present. We are simply going through -a time of readjustment of the trade balance, and we can doubtless pull through, as well.' if not better, than has been done before. The banks saw the position coming, and acted early by raising interest and pxehangc rates Lo assist in righting matters.... .. ... ..