BANK OF NEW ZEALAND.

Press, Volume LII, Issue 9224, 30 September 1895, Page 2

BANK OF NEW ZEALAND.

THE ANNUAL MEETING.

(press association telegram.)

WELLINGTON, September 6. The adjourned annual meeting of tbe I Bank of New Zealand was held in the Cham- ■ ber of Commerce this afternoon, the President of the Bank, Mr Watson, was iv the chair, and about thirty shareholders were ; present. The President made the following statement : —" You have had the balance-sheet of the Bank in your hands for the past week, and are doubtless aware of the fail particulars of the Bank of New Zealand and i Banking Act, 1895, which has just become i law. Into the figures of the balance-sheet I need hardly enter, beyond saying that it is proposed now, in addition to the eni tries required by the Act, to write ioff the reserve fund, £45,000, and the J balance of the profit and lose account, j £383 so as to reduce the item ' bad and jdoubtful debts' to £376,900, the amount jto be written off as provided by the Act. lAs many shareholders may not see the Act {itself, or, although seeing it, may nob be able to apply its provisions to the circumBtance3 of the Bank so as to form a correct I conclusion, I take this opportunity of j placing on record the provisions of the Act, and the exact position in which it will leave the Bank. In the first plt»co the paid-up capital ot £900,000, and the proceeds of the call of £3 6s 8d per share payable this year, are written off. To replace these by way of capital the Government are to subscribe for £500,000 preferential shares bearing interest at the low rate of 3£ per cent. These shares may ba repurchased by the shareholders at par within the next six. years. The shareholders are called upon to pay another £3 63 8d per share, in four half-yearly instalments, beginning on the 30th of June of next year and endiug on the 31sb of December, 1897. This will be share capital, and it is stipulated that out of the net annual profite of the Bank, after the payment of £50,000 to the Assets Board. Five per cent. 00 these shares will go to the shareholders for the present, and in the event of no deficiency remaining on account of the properties removed from the Bank, the whole of the profits of the institution will be payable to the shareholders. In any event no further call can be made until after the 31st of December, 1893. £1,000,000 invested according to the Bank of New Zealand Share Guarantee Act of 1894 ia freed for use in the Bank's ordinary businese. The Government appoints one Director of the Bank while the liability on the part of the colony subsist?. The whole of the stations, stock and implements, and other landed properties in New Zealand, including the properties of the Auckland Agricultural Company and Estates Company's shares in the Thames Valley Land Company, are co be sold to a corporate body termed the "Assets Bealieation Board" for the price of £2,731,706, and such additional sum as may be necessary to adjust the accounts after the 31sb of March. This sum represents the book values of these properties, and this incubue on the assets of the Bank and the Estates Company will now be replaced by the debentures of the Assets Board bearing 3£ per cent, interest, and having any deficiency upon them guaranteed by the Colony. By this transaction the balance-sheet of the Bank of New Zealand Estates Company will be reduced to small figures, and tbe position of the Company will be rendered thoroughly sound, while its liquidation and total extinction in a very short time will be feasible. The amount to be written off as bad in the books of the Estates Company will be £467,100. against which no assets exist, and £296,500 to bring down the remaining assets to proper realisable values. The present deficiency in the assets to be taken over by the Assets Board is computed at £850,000. With good and economical management on the part of the Assets Realisation Board and the increase in the values of wool and other products, of which there is every likelihood, this deficiency might be made to disappear, and the capital and goodwill of the Bank, which will now be very valuable, would be then the> free property of the shareholders. In order to secure the above deficiency, the colony is to have a Hen upon too shareholders' capital and the uncaUep reserve liability. The Atsets Board is to consist of three persons, two to be appointed by the Government and one by the Directors of the Bank. Power ia given co the Bank to purchase the businese of any other Bank doicg business within the colony, but so that only the sound business of such Bank s'eould be t&tcen over, and that the selling Btmk will have to liquidate ice own bad aad doubtful i debts. It is estimated that by such parchase the Bank of New Zealand will be enabled to pay shareholders regular dividends of 5 per cent, per annum, and contri- j bute materially to the redaction of the deficiency of the Assets Realisation Board. Tbe Act further provides that whilst the liability ] of the colony exists the shareholder are not to wind up or dissolve the Bank so as to cause a loss to the colony, aad tbe Government, through the President, have power of vetoing such proceedings as might be considered detrimental to the imereeis of the colony. These are the principal changes brought about by the Act. Their effect will be to separate entirely from the Bank and free the creditors of the Bank from any risk attending a large mass of properties standing in tbe books at nearly £3,000,000 of money, which hare so weighed down tbe Bank during the past (en years. Had the Directors of tbe Bank known, when the Bank of New Zealand Estates Company, Limited, was incorporated, tbat tbe pens* of wool and other produce would fail so low as they have done they would probably never hare incorporated the Company at ail, bnt would have taken other

measures at thai time. Had prices not fallen it is probable that tb« deiicMney with which we are bow dealing weald not have been so serious as to warrant the present measures. I would at>k those whose first impulse would be to impute blame to consider what the vilaes of the properties were tea yean ego and what they are new,

and to remember that the shareholders of nearly every important financial institucion doinj; business principally in the colony have suffered severely, and in many instances have not only had to pay calls, but have completely lost their properties. Oa the 7th of February last, in this place, I stated to you that it was not contemplated that any fnrthur amount of reserve liability should be called up. At thfct time we had probed into the affairs of the Bank, but were unable to ascertain the position of the Estates Company until the accounts of the head office were removed from Londoa to the cjlony and until we could strike a balance for the year ending 3lsi; March last By the Share Guarantee Act, 1594, the Directors and Auditors of the Bank were enjoined to treat the item of £1,850,000 shares in the Estates Company at par value. Oα ascertaining the result of Use working of the Estate , ! Company for the year ending 31st of March last, and on becoming aware of the whole actual position of the Estates Company and the Auckland Agricultural Company, it waa apparent that under tbe system then existing the Estates Company was unable to pay interest on the indebtedness to the Bank, and if the prices of pro duce did not rise very considerably yearly deficiencies would accrue, which we should not be justified in concealing from the shareholders. Had we merely come to this meeting with the tidings of deficit 3, the credit of the Bank would be gone and the Bank itself soon follow it. We did not consider it our duty to throw up our hands in such a way, but we represented the position to the Government, Parliament having already assisted the Bank by a guarantee of £2.00(5,000, and we asked for reasonable assistance in the interests of both the colony and the shareholders. Then a Joint Committee of both Houses wae set up to inquire into the affaire of the Bank. Tiiia Committee while being careful not to destroy he confidence of the customers of the B&nk by probing into individual accounts made the most careful investigation into the general business and affairs of the Estates Company, and asked the Directors to put forward their recommendations as to what should be done* to rehabilitate the Bank. Thereupon the Directors recommended a scheme in most respects similar to that subsequently adopted by the Committee in their report. The most important alterations made by the Committee were, that instead of £1,000,000 preferential shares being subscribed for by the Government, only £500,000 had been subscribed, and that instead of the shareholders having issued to them deferred shares (which they would be able to deal with) in lieu of capital written off and hypothecating the whole £6 133 41 against any deficiency on the estates, the Committee reported that there should be a call of £3 6e 8d per snare to be turned into capital, the dividends on which up to 5 per ceut. after the payment of £50,000 per annum to the Asset 3 Realisation Board should, if earned, be paid to the shareholders, and that this capital, together with the remaining £3 63 8.1, should be secured to the colony for any deficiency on the Assets Realisation. Thus had the Directors' recommendation been carried out no call might have been neceseary. Wo consider, bowevei, that the shareholders should be grateful for what the Committee recommended, and for what Parliament has given effect to. Had the Bank been allowed to go into liquidation the shareholders would uadoubtealy have had promptly to pay the whole reeerve liability, or as much of it as they individually could. Now there is only one-half of the reserve liability to pay, aud of spreading the payments over two years, commencing nine months' hence, will be agreeable to those who are not in affluent circumstances, while both to them and to those who are rich there is the consolation that on the payments there is every probability of their getting 5 per cent, interest, besides having under favourable circumstances the goodwill of an enhanced business preserved to them. By the Act of tho Legislature the position of the U-ii.k as reeards its creditors is rendered as secure and strong as that of any institution doing business South of the Equator; and the position beiug now thorougnly ascertained the shareholders may well look forward with confidence and hope. The prospects of the colony, with, which the Bank is so much -bound up, are brightening. Wool and other products are advancing in price ; and when ft ia taken into account that Id per lb rise in wool alone will mean £12,000 per annum to the Assets Realisation Board, ib will be seen how importaut any rise in the price must be. The active development of the mining industry which is taking place both in the Thames aud the Coromandel .districts, and on the West Coast of the South Island cannot fail to enhance the profits of the Bank."

The President moved the adoption of the report and balance sheet. The Hon. W. \V. Johnston seconded the motion.

Iα answer to Mr Blanchard, the Chairman stated that the adoption of the report bouud them to writing off the bad debts mentioned in the report.

The motion was put and carried without discussion.

Major Messenger asked what tho goodwili of the Bank meant to the shareholders, as they did not know what they had to look forward to. When he took shares they were £10 iv value, for which he gave over £20, and understood he had to find £10 and no more. He wan led also to know, as the Biuk had been declared in Parliament to be solvent, how it was necessary to call on the reserve liability. He noticed that Mr Ward, in the morning paper, stated that the shareholders would have a reversionary interest in the property. It appeared to him they, as shareholders, were there simply as a matter of form, as Parliament controlled all they did.

The President said the shareholders had active power, aa they appointed their Directors, but Parliament had the power of veto, which was only right in consideration of the guarantee.

Major Messenger explained that he was not antagonistic, but desired information.

The President explained that the goodwill was the reversionary interest in the Bank, which would cotne back to the shareholders wlien the whole deficiency on the Assets Company was cleared off ; and, as to the reserve liability, what Major Messenger had said was true before the Act of 1394 was passed, bat the Act of 1895 had altered the position.

Mr Blanchard, in giving utterance to his views, eaid he thought they were those of others present. Ho had placed these views on paper, and in reply to a remark of the President that, he was not talking Co the motion, said he would finish by moving a resolution, but if the shareholders did not desire to hear him he would ait down. The speaker complained bitterly of the action of the Directors in retiring from the position taken up at the last half-yearly meeting as to the Assets Company. When in February a number of the shareholders desired an investigation into the Assets Company they were sat on, yet they placed the same information at the disposal of the Parliamentary Committee. He acknowledged that slight alterations were necessary in the Act of 1894, as tho second million was so placed as to have to be invested at a loss. They knew that £750,000 debentures were only redeemed in May, and no one expected that in the last halfyear, with tho low pricea of staple products, the Bank would make a profit for the half-year ending March 31st. Yet they placed the affairs before the Joint Committee of both Houses, not one of whom was a shareholder in the Bank of New Zealand, while one was President of an opposition Bank, and till lately an employer of the President of the Bank of New Zealand. Yet though the shareholders had asked for an investigation this was refused ; and now an attempt was made to show as darkly as possible the management of previous Directors, in order to make their own look brighter. What was the meaning of the sentence in the President's last year's speech, that "We are satisfied that when the call is paid no further call will be necessary *"

The President pointed out that Mr Bianchacd had omkted to read the whole sentence, which said, " Provided we can work on the lines we have laid out for ourselves."

Mr Bianchard did not think it was necessary, and said the position wta that they could not trust the present Directors any more than their predecessors. He complained that at the previous meeting the Directors had refused to answer questions or give information, and compared this with their action in granting the information to the Parliamentary

Commutes. A short time ago he had called at the Bank for information as to the land tax payable, and was asked by the President what he wanted it for. He was told then that he would soon see legislation that would ease his mind. Ho stated that the total saviDgs of the Bank would bo £96.000, made up mainly as follows :—£15.000 in working expenses, £13,000 in salaries and honorarium, £40,000 hi debeuturcs paid oil in May, £11,000 by replacing 5i per cent. by 4 per cent. Considering these 3avinj;*, the action of the Directors could only be described as contrary to the interests of the shareholders, whom they seemed to look on as so many wells into which they were going to placs force pumps,, so that every six months they would got a supply of liquid gold. He called on the shareholders i to defend their rights while yet they had time aud not Rive proxies thoughtlessly. It the shareholders would send him their proxies he would ace that their interests were protected, and he dared the Directors to postpon3 the meeting till after the result of the London meeting was known. It had been stated by one Legislative Councillor that he I knew what Mr Ward had stated in London, but Mr Andrews was theonly man who knew that. A hage altar had been set up in regard to this matter and the shareholders were to save the colony. He aeked why should the shareholders do so ? It h&d been said that the Government would make a present of two millions, and he said let them keep their word. He stated that, on the strength of whai the President had said, many of the shareholders had pledged their credit, and this call meant ruin to them, and in their name he spoke of this. It had been said that if the shareholders did no*-- accept this position it would mean liquidation. It, meant nothing of the kind. It was not for him to place tho alternative before them. But he believed one result would be that this Bank would draw down the Government, and it would be a good thing if this body of political experimentalists and plungers were out of office. He concluded by moving— " That this meeting calls upon the Directors at present ia London, Messrs Glyn, W. T. Holmes and another, whose name he had forgotten, to resign their position on the Board of thia Bank."

The President called for a seconder, but there being none he declared the motion lapsed. He explained that the Directors had either to come to the annual meeting when they knew of a deficiency, or take steps to make the position good ; and this was what they had done. He had stated in his speech that in February they had probed into the position of the Estates Company. If they allowed the Bank to liquidate the shareholder? would have to pay up their calls at once.

Mr Blanchard—"We would have the colony's two millions." The President had yet to learn that the two millions would stand between the colony and the shareholders. It would have been a liability of the shareholders, and would have had to be paid up. Mr Blanchard had threatened to take the matter to the Supreme Court and obtain an injunction to force the Bank into liquidation.

To this Mr Blanchard retorted that this was quite true, and if be had had the money he would have carried it through.

Mr Riloy (Dunedin) said he had listened with pain to the tirade of Mr Blanchard. 16 WR3 unworthy of him, and would not damage the President of the Bank. He was pleased that this motion was not seconded, and also thankful that Mr Blanchard , s motion last year, to set up a Committee to investigate, was lost, if his speech was any criterion as to what the result would have been. He would move—" That this meeting desires to accord a hearty vote of thanks to Parliament, and e3pecially the Government, for the timely assistance rendered to the Bank of New Zealand and the colony at large, at a most critical period in their history, by the passing of the Banking Act of this week, and also to express its gratitude for the consideration shown to the poorer class of shareholders is spreading the call over two years ; further, the meeting cordially acknowledges ita deep obligations to the President and Directors for the efforts they hare made to conserve the interests of the shareholders and to put the Bank on the solid foundation on which it now rests." He thought this resolution would commend itself to the shareholders. They must not, forget that the position Was not due to the action of the Government or the present Directors. It was due to those of the past* and should have been inquired iuto ten years ago by Mr Blanchard and others. He was not owing the Bank of New Zealaud a penny, and could say that the Directors had done everything they could to conserve the interests of the shareholders. Ho believed they could look forward hopefully to the future. If the Bank had been allowed to close its doors it would have caused wide-spread ruin and distress, and paralysed trade and industry. The colouy had been on the mouth of a volcano, and had ib not been for the Government, who had shown great pluck and consideration, the colony would have been blown to atoms. If a Committee of shareholders had been appointed last year, would the Government have stepped in ? Not a bit of it; and the result would have been simply ruinous. Ho granted that the call would be hard on some shareholders; but it would form the nucleus of future capital, and would return five per cent, iuterest. They had every reason to look hopefully to the future. The fact was that the Bank had been greatly damaged by some of its own shareholders, and had it not been for some of its patriotic friends, its position would have been worse. When people came to him he advised them to have faith in the old institution. The Bank had been greatly mismanaged in the past, but he believed they now had at the helm those who would steer tho good old ship safely into port. Four classes would be benefited by the Ace juat passed. The first was the struggling settlers, who if the Bank closed would be bound to ba crushed, as other Banks would not take their accounts. The second was the working men, who he hoped would realise that if the Bank had closed the whole community would have been in a state of panic, and labour could not have been employed. The Government had shown intelligence and backbone, and he for one felt deeply gratefnl to them. Another class that would benefit would be the shareholders themselves. He believed it would be the salvation of many of them, as, supposing the Bank had gone into liquidation," all would have been called up at once.

A Shareholder—There were the assets as a firafc call.

Mr Kiley—The assets on a forced eale would not realise much. In answer to Mr Blancbard, he asked how could the Directors have given the information they had now at the last meeting. He wa3 thankful the Directors had sufficient honesty to show the real position, and he hoped they would go ou, as the Bank now had a good future, especially if they secured the buainea3 of the Colonial Bank. It wis monstrous to say that the Colonial Bank was in the same position as the Bank of New Zealand. Hβ knew that it was doing good business. Mr Tanner, solicitor, of Wellington, seconded the resolution. He pointed out that the two millions granted by the Government belonged to the people of New Zealand, and it- was absurd to talk of it ever being given up to the Bank. In giving the guarantee the Government had acted as Statesmen. The present Directors had not assisted in bringing the Bank into its present position, aud those who had weregreacly to blame. What had led to it occurred a decade or more ago. The shareholders had the call spread over a number of years, and that was some satisfaction. There was something in the goodwill, and in getting their finances into good order, with the guarantee at their back to give them hope that they weuld get their money back. Mr George Alien, as one of the original shareholders of the Bank of New Zealand, said, much as he had been opposed to some of the actions of the present Government, their action in connection with the Bank had been the right thing in the right place. On thinking over the ramifications of the Bank, he held it would have been a bad thing for the Bank to have gone into liquidation. He did not see that the present Directors could have done otherwise than they had done, and he believed the resolution just moved was rignt.

Mr Charles Smith hoped the resolution would not be passed in the form it was ia, as it was absurd to say that they knew the Bank was on a solid foundation. He thought, if it was sent to England in that form, it might raise false hopes, and if pat in that form he would have to oppose it.

The President said it was quite correct to say the Bink was on a solid foundation. Mr Martin Kennedy, as a shareholder in the Bank, had pleasaie in supporting the

resolutions. He, like others, had suffered, having only bought in some cix or seven yeat'3 ago. Ho thought thanks were duo to the Parliament for their action, which was nob of any particular party, for both sidea of politics had assisted. They had baeu blamed as Directors for approaching Parliament, but there was an obligation by the deed of settlement giving Parliament power to wind up the Bank when half the capital wa3 gono, and wheu the Directors went to the Government the capital was all gone. If liquidation had been forced, the first thing the Directors by the deed of settlement would have to do, would have been to call up the reserve liability at once. That wae the position last year and, coming to this year, he said the Government was giving them half a million, and if they got 5 per cent, on their shares they would geb some of their money back. If tliey could not pay their calls they might be able to finance them. As to profits, they believed the Bans: would earn what the Directors had put forward. The proprietors of any commercial institution should have some consideration for their creditors, and the Bank's depositors deseived this. It would nob have been right for the Directors to have taken a step that would expose them to loss. Ultimately the colony might lose something, bat they hoped not. It had been asked what was the goodwill. In the first place there was this half million ; and, if things looked up, they could buy back the £500,000 worth of shares. That was possible, and it might be the interest of the Bank to try and redeem this other half of the goodwill. When full partioulara reached the shareholders in London they would join in this resolution, that Parliament had done a thing for which they, a 9 shareholders, had every reason to b 3 thankful.

Mr Riley, in reply to Mr Smith, said that there was no Bank in the colonies in such an impregnable position. Its assets had been written down, and it had a trading capital of three millions. He had great faith, not in large dividends of 15 per cent., but in reasonable profits, and as a large shareholder himself, he had great sympathy for the shareholders in general. If the Bank had closed, the colony would have suffered, fresh taxation would have had to be levied, and every cclonisb would have suffered.

On being put to the meeting, the motion was declared carried unanimously.

The President returned thanks for himself and the other Directors. They had had a trying time, and had done their beafc for the shareholders.

Mr Martin Kennedy stated that there was perhaps a feeling that, because the (government appointed the President, Auditor, and Directors of the Bank, the business of trading firms would be disclosed. He stated that nothing of the kind was possible, as the Directors all took a pledge of secrecy, and he, for one, would not occupy a seat on the Board if anything of the kind were possible. He expressed the highest opinion of the President and the Auditor of the Bank.

Mr Allen moved a vote of thanks to the officers of the Bank for their services during the past year.

This was seconded by Mr Bairy and carried.

Mr Andrews, the Auditor, responded for the officers.

In reply to Mr Blanchard, the President stated that the next half-yearly meeting would be hold in February, as provided by the Act.

The meeting then terminated.

THE COLONIAL BANK

DUx\EDIN, September 20. The report of the Directors of the Colonial Bank for the half-year endinjr the 31st of August, states that after making various provisions the neb profit is £12,935 lla 3d, to which has to be added £8700 15a sd, the balance from the previous half-year, making a total of £21,636 6j 3d. Deducting land, income and note tax £1656 3? 10.1, there is available £19,930 2a 10d. Pending the result of the negotiations for the purchase of the Bank, the Directors do not at present intend to deal with the balance, but will adjourn the general meeting on the 25ih of September to a day in October, by which time the wishes of the shareholders, as expressed at an emergency meeting shortly to be called, of which due notice will be given, will be known.

DUNEDIN, September 25. •The Hod. G. McLean, at the Colonial Bank meeting to-day, thus referred to the Banking negotiations :—" These negotiations, for reasons explained at the time, we felt it necessary, in the interests of tho shareholders, to break off. If the conditions on which this Bank then insisted had been agreed to, the difficulties which afterwards arose, and which were dealt with during the present session would hate been avoided. Both parties during the present negotiations have, I believe, been anxious to come lo some fair and equitable arrangement, bat no arrangement has been arrived at. It is not at present desirable that the details of the negotiations should bs made public. The provisions of the Act passed this session have so far prevented such an agreement being come to between the two Banks as in your interests we could agree to. Whilst the Directors of this Bank and of the Bank of New Zealand may enter into a preliminary contract for the sale and purchase, the validity of such contract rests on the subsequent ratification by the shareholders. Whatever the Directors may agree to in the meantime will be of no validity unless approved by you. At present the Directors think that the further consideration of the report and the Bank's position should be postponed to a convenient date, when they hope to be in a position to state definitely what course they will recommend the shareholders to adopt."

After the motion to adjourn the meeting of the Colonial Bank had been seconded, Mr J. W. Bain, Invercargill, aaid the shareholders whom be represented had no objection to a sale so long as it was a sale for cash clear of any further liability. They had no objection, many of them, at any rate, to such a sale. His own opinion waa that the Bank ihould go on. It waa important for

the shareholders to know the condition* and the terms on which the sale and transfer wore to be made. Mr Bain read the clause of the Act which authorised the sale. Ho was about to explain what had been done at the meeting at Invercirgill when a point of order was raised.

After some further remarks, the Chair* man said that, before putting the motion, he should like to disabuse the minds of shareholders of the notion that there wae to ba anything else than ft sale for cash. Ttiore was no other question at all. It was a question of purchase, and for cash. Hβ had allowed Mr Bain some latitude, and that gentleman had retd to the meeting the terms of the Act. Tho9e very terms had prevented the two sets of Directors from coming to an agreement, and they must be altered if they were to como to terms. The Chairman added that as regards the emergency meeting there was no idea of the Directors stealing a march upon the shareholders. The shareholders were going to havo a deliberate vote. There was no need to he afraid of that.

The motion was then carried unanimously. The meeting was adjourned until Oα* tober 30th.