BANK BAROMETER

Auckland Star, Volume LXII, Issue 87, 14 April 1931, Page 8

BANK BAROMETER

[MONETARY SITUATION. SHRINKAGE DURING YEAR. EXCESS OF ADVANCES OVER DEPOSITS, £3,080,295. EFFECT OF EXPORT PRICES. (Special to "Star.") WELLINGTON, Monday. The quarterly returns of the trading banks just issued show that money is ;ess plentiful than a year ago. Fixed deposits show an increase, but free deposits have a heavy decrease, and advances show a light increase. This was only to be expected, in view of the low prices ruling for our exports, especially aool, and the consequent reduction in ihe excess of exports over imports. Also, uie bank debits show that the volume >f business being transacted generally ',s much lighter than a year ago. The •eturns from the realisation of the current season's exports have not so far been enough to ease the monetary situation, and at March 9 advances were still lightly in excess of deposits,_ even in•luding the Government deposits. Following is a comparison of the main ■features of the latest returns,' with choso of the previous quarter showing :he movements in the three months: — Mar., 1931. Bee, 1930. £ £ Deposits, free .... 18,329,853 18.597,839 deposits fixed .... 32,922,086 82,775,50g Itonnisits Govt. . . 2,889,1-' G. 1,8i>9,407 $$?&Jfi£ii " rf«ttta 6,133,388 Coin and bullion . 6,955,422 b,848,b48 nispmmts 1,067,844 1,168,0<4 Advances .....V.. 53,214,674 Realisations From Exports. This comparison shows that the total of the two classes of deposits has dereased in the quarter by £121,457. This s a very small reduction, but at this time of the year deposits should t>e naterially augmented by the realisations from exports. Advances and discounts together show a reduction of £50,514. Normally there should be a •reater reduction in this quarter, and the banks should be well supplied with funds by n6w, but-instead of that we find that advances are in excess of deposits bv £3,080,295, or £70,943 more than in the December, which is most unusual. Government deposits are increased by recent income tax payments, and metal holdings show a moderate increase. Note circulation exhibits a marked decline and is at a comparatively low level, indicating reduced spending power, which means quieter trade. These are the movements in the quarter only, and r-asonal influences affect these figures. A better comparison is that with the corresponding quarter of earlier years, which we give below. Taking first the deposits, we find the following movements in the past five years:— Free. Fixed. Total. Mar. qtr. £ * f* M •nisi -isioqasa 32.922.086 51.201.5MJ illl : 88838 fa«&is gjtow^o i,,00 05 736,743 29,608,752 00,340,400 1928 ' 24482151 25 476,144 49,058,29.) 1927 .' 24,440,778 2i;088,035 45,525,513 Substantial Total. The total exhibits a substantial reduction of £2,751,319 in the year, although the fixed class shows a fairly heavy increase of £2,824,668 The orowth in fixed deposits under the stimulus of higher interest rates is a very noticeable feature of this comparison. The free class, which represents the available spending power of the community, shows a very heavy reduction of £5,575,969 in the latest year, which must mean quieter trade all round, and the total is the lowest for several years past.

Turning now to the advances, we see how the "banks have utilised the funds provided by these deposits, which, arc the main source of their supplies of funds, for lending; These compare as follow for the past five years:— March Quarter. Advances. Discounts. lotal. 1931 . 53,264,390 1,067,844 54,332 234 i«m 52 447 130 1,229,643 53,670,779 iloq 45175304 1184,440 40,359,744 10*s * 44565,475 1504 895 40,070,370 1527 I 45,939;i89 1.861JG19 50,800,808 Heavy Demands on Banks. In 1929 the banks were very flush of funds, with an excess of deposits of nearly nine millions, but the fall m export values, coupled with imports failincr to decrease quickly enough in sympathy, brought heavy demands on the banks, and advances jumped over seven millions. Although deposits have dropped in the last year the banks have maintained, and even slightly increased their scale of lending, with the result that advances are well in excess of deposits. The relationship of deposits to advances is the most interesting feature of these returns, as it shows clearly how the banks are situated as regards available funds. We, therefore, give below a comparison of advances with deposits for the last six years: — March. . Excess of ouarter. Deposits. Discounts. Deposits £■ & £ 1931 . 51,251,939 54,332,234 3,080,295* 1930 . 54,003,240 53,670,779 32b.*61 19''9 . 55,345,495 46,359,744 5,955,7;>1 1928 49,958,295 40,070,370 3,887,925 1927 . 45,528,813 50,800,808 5,271,995* 1926 . 47,302,450 48,285,142 952,662* * Excess of advances. This shows that there has been a reduction in the funds held by the banks of £12,066,046 in two years, and advances exceed deposits by £3,030,295. The position, however, is better than in 1927 by over two millions. The shares of the different banks in these deposits and advances compare as follows:— Banks. Deposits. Advances. £ £ New Zealand .. 24,779,939 25,233,450 Union 5,927,140 0,200,017 K.S.Wales .... 0,175,613 6,516,129 Australasia ... 4,769,983 5,037,623 National 8,099,736 9,686,199 Commercial .. . 1,499,522 1,598,816 Each bank shares in the excess of advances. Each bank shows decrease in deposits, but only the Bank of New Zealand has increased advances. Metal and Notes. Fallowing are the metal holding and note circulation: —■ March Coin and Note Quarter. Bullion. Circulation. £ £ . 1931 ... C,955,422 5,802,261 1930 ... 6,048,838 6,417,038 1929 ... 7,203,361 6,370,894 1928 ... 7,867,459 6,376,668 Metal holdings have been reduced in the last two or thr&j years by the export of surplus gold in excess of requirements. The substantial drop in note circulation seems to indicate harder times and reduced spending capacity. Government deposits at £2,889,126 are £576,760 less than a year ago, while the I banks' holdings of Government securities ;it £4,537,717 is £908,925 less than last year. . »