DOMINION BANKING.

Auckland Star, Volume LXIII, Issue 178, 29 July 1932, Page 4

DOMINION BANKING.

LAST YEAR'S OPERATIONS. DIVIDEND LOWERED TO 5 P.C. RESERVES INCREASED. The sixth annual report of the Dominion Investment and Banking Association. which has just been issued, indicates a satisfactory termination to the year's activities. The directors' report states: — "After meeting all expenses, writing off an amount of £21 11/ from oliko furniture and fittings, and effecting due depreciation of doubtful securities, the net profit for the year amount-? to £10,071 5/0, which, added to £1007 18/ brought forward from last year, makes a total of £11,97!) 3/9, which your directors recommend dealing with as follows:— £ s. d. To payment of dividend <>C 5 pet cent on A shares ami lirst and second issues of ]J and C shares 5.451 4 11 To add to reserve fund (bringing total to £4000) 500 o 0 Tα create a "contingency reserve fund" 2,000 0 0 To carry forward to next year 1,027 18 10 £11,079 3 0 "Despite the continued state of commercial and financial depression," adds the report, "the results of the year's trading would have enabled the payment of the usual rate of dividend, but the revolutionary legislation enacted this year regarding the arbitrary reduction of mortgage interest is a serious interference with the business of your association. Protest have been unavailing, and in common with similar institutions your association must comply with the conditions imposed upon it by legislation." The directors justify the establishment of the contingency fund, stating that "the future safety and security of the shareholders' investment is of greater importance than the immediate payment of a high rate of dividend." The fund itself is referred to ae provision "for the sound and conservative treatment of securities." Concerning the banking department the report proceeds: "The volume of business in this department has been fully maintained, and it is pleasing to record even under existing conditions an increase in the total amount to the credit of depositors to £137,340 3/1. Your directors regret that the terms of recent legislation have compelled them to reduce the rate of interest paid to depositors in the association's savings bank department, and will continue their efforts to enable the payment of a reasonable rate of interest in the interest of thrift, and in the furtherance of the objective of home ownership by means of finance provided by the association." In regard to advances the report says: "Advances made during the past year have been granted only upon a sufficient margin of security, having regard to present economic conditions. It has been necessary in some circumstances to vary the terms of the association's original advances, but it is the opinion of your board after careful scrutiny of the whole of current advances, that with the depreciation of securities which has been made and the establishment of a 'contingency reserve fund,' the business of the association is sound, and all proper precaution has been taken to maintain that condition." The retiring directors, Sir James Gunson and Mr. H. Uellam, are nominated for reelection at the annual meeting, which takes place on Wednesday, August 17. Past Years Compared. Not Divi- Rβ^

*Nine months only. Balance-sheet Figures. The following shows the movements in the principal items of the balance-sheet during the past three years:— LIABILITIES.

Total assets £328,824 £324,725 £324,271 Comments. This financial institution of Auckland origin has maintained the progress made in the early years of its existence. Established as a savings bank and investment institution, it has a special feature, in that its liabilities to depositors are backed by a substantial proportion of share capital. As far as can be judged from the accounts presented, the business, which fortunately had been admirably consolidated in the first few years of the company's existence before the slump set in, has been well maintained. Deposits show little alteration, the only difference being a comparatively trifling increase. Earnings have been affected by Government legislation, but it would have still been possible to pay the usual 7 per cent dividend had not the directors very wisely decided to set up a special contingency fund, with a credit of £2000, at the same time adding another £500 to the general reserve. In their report the directors complain of Government action in limiting the rate of interest they may pay for deposits. Last year they were paying 5 per cent, reduced later to 4%, for savings deposits, and, so far as can be judged, were able to make profitable use of the money on this basis. According to latest legislation, they must not pay more than 3% per cent. The directors doubtless feel that this arbitrary interference may cause them to lose some of their customers who had bcea attracted by the higher rate.

As an institution accepting the savings of the public the balance-sheet is much more important than the profit and loss accounts. Here it would appear that depositors are well protected. The mortgage securities, which, by the way, are all first mortgage and ni'c all accepted on the amortisation principle, which in general terms should cover all possible depreciation, are more than double the amount received in deposits. The contingency reserve now created is an additional precaution that is justified by the abnormal conditions under which all trading is being conducted at the present time. Total reserves are increasing each year and, including the carry forward, now amount to over £7000. Liquid resources are down £1700, but at £47,342 seem adequate for any emergency that such an institution might have to deal with.

Capital, profits, (lends, servos. Tear. £ £ £ £ ♦1027 ... 5R.195 2,004 1,457 B47 1928 . . . 137,558 8,297 7,491 1,307 1929 .. . Iii3,5e!> 11,006 10,243 2,453 1930 ... 167,922 12,870 11,331 3,992 1931 ... 171,100 12,251 11,735 4,508 1032 . . . 171,303 10,971 8,451 7,028

1930. 1931. 1932. £ £ £ Paid capital .. 107,922 171,100 371,303 Deposits 133,304 130,007 137,310 Advances authorised but unpaid . .. 12,040 400 — Reserve 2,000: 3,000 3,500 Profit and loss . 13,322 13,243 11,070 ASSETS. 1030. 1931. 1032. £ £ £ Advan c e s on mortgage ... 291,277 275,000 270.7S1 Furniture, etc. 00 105 80 Govt. stocks .. — 8,725 15,281 Bank N.Z. fixed deposit 20,102 31,245 23,137 Deposit at call 14,100 0,017 0,041 Bank balance . 3,134 3,132 2.8S3