BANK OF NEW ZEALAND.

Press, Volume XLVIII, Issue 14580, 5 December 1912, Page 10

BANK OF NEW ZEALAND.

j HALF-YEARLY MEETING.

IMPORTANT PROPOSALS

! (rRESS ASSOCIATION TELEGRAM.) I WELLINGTON, December 4. I Tho half-yearly meeting of the Bank !of New Zealand shareholders was held

; at tho head office at 11 a.m. to-day. j Tho Chairman of Directors (Mr Martin Kennedy), in the course of his speech upon the affairs of the Bank, said:—

! Tho retiring director, Mr William j Watson, has again offered his services, ' and there being no other candidate, I (have much pleasure in declaring Mr j Watson duly elected. He has now occupied a seat on the Board for eighteen consecutive years. Tho profits for the half-year ended 30th September last, compare favourably with those for the corresponding period of any previous year. The results of the current half-year's working are likely to prove equally satisfactory. ■ An interim dividend at the rate of G per cent, is declared accordingly, md will bo payablo in Wellington tomorrow, sth inst., and at branches on receipt of advice. MR REID AND MR BEAUCHAMP. Mr J. B. Reid, who was absent from tho Dominion on tho occasion of our last meeting, returned in October, but has quite recently resigned his position as a director. I have Mr Reid's authority to say.that, in resigning from the directorate, ho was prompted by a desire to open the way for the appointment in his stead of a director able to devote moro time to the duties of tho position than he finds it possible to give. .Mr Reid has always taken a keen interest in the affairs of the Bank, . and his retirement is a matter of very j great regret to his colleagues. He, I however, urged tho course ho has fol- ! lowed as being the best in tho interests of the Bank, and the Government men his wishes, appointing in his stead our : old colleague and former Chairman. Mr 1 Harold Beauchamp, whom we nave ! much pleasure in welcoming. The hardening tendency of tho money [ market, which I commented upon when | I addressed you in June last, has since been accentuated both in the colonies I and London, and, in view of the conditions generally, it has been deemed prudent to continue the pursuit of the somewhat conservative policy adopted early in the year. At the same time, wo have met the legitimate requirements of our customers, and have given the necessary support to tho industries and trade of the Dominion. While there have; of course, been cases in which we have deemed it advisable to refuse accommodation applied for, we think that, on the whole, our customers recognise that we have responded well to the applications. LOCAL MONEY MARKET. The existing state of the local money market brings" homo to us, very forcibly, tho facility with which financial conditions change in theso colonies. It is but somo eighteen months ago that mv predecessor, addressing you fro.a this, chair ' (in June, 1911), remarked upon the abundanco of m6ney available, and the restricted scope for its employment. At the present time we are experiencing an exactly opposite state of affairs. Tho scope for employment of money is at the present timo wide, but the money is scarce, and the demand for accommodation, though in most cases quite legitimate, is greater than the Banks feel themselves justified in satisfying. INCREASED CAPITAL. 1 see nothing in the immediate outlook to warrant an expectation of an early return to easier conditions; indeed, there are not wanting indications that an even greater degree of stringency may lie ahead. Under the circumstances, the Board havo of lato been considering whether the time has not arrived to propose a substantial increase in the Bank's capital. The existing capitalisation of the Bank was fixed by Statute iv 1903, and we are legally advised that, without legislation, nothing of a definite character can be done by shareholders in tho direction of increase. Wo therefore think it will probably be desirable that stops should be taken in the next session of Parliament to obtain authority for the shareholders to increase tho capital from time to time, as they may deem expedient, by resolution in general meeting in terms of the Bank's deed of settlement. There can be no doubt that, at the present time, an accession of capital would bo of great benefit to the commercial and industrial interests of the Dominion, as it would put the Bank in the position ot being able to afford financial assistance in many quarters where at present it has to oe refused. It woukf also undoubtedly be in your own interests, as it would enable us to extend our connections and cement valuable and profitable relationships. THE MILLION STOCK. Legislation will be necessary next , year if tho £1,000,000 4 per cent. fuaranteed stock, which matures on uly 19th, 1914, is to be renewed under the guarantee of the New Zealand Govvernment. We therefore, propose, with your approval, to make appEcation to thegovernment, requesting them to introduce in next session of Parliament a Bill conferring upon shareholders power to increase the Bank's capital. DOMINION PROSPEROUS. Notwithstanding the stringent financial conditions, tho state of the Dominion's trade and industries appears to bo prosperous. The season bids fair to bo an abundant one, and the prices of our staple products—especially wool —are highly satisfactory. There is every indication that the prospects for

wool aro exceedingly bright, for the coming season. The improvement that has recently taken place in the hemp market will, if maintained, no doubt result in renewed activity in the flax industry. Tho recently published trade statistics for tho year ended September 30th last, show a gratifying expansion in tho volume of our exports for the year, the figures being : — Exports for tho year ended— £ Sept. 30th, 1011 ~. 19,912,656 Sept. 30th, 1912 ... 20,714,595 Inorenso ... £801,939 This movement bids fair to continue during tho current year in an increasing i ratio, tho figures of our principal exI ports for tho month of October, compared with tho corresponding month of last year, showing a very encouraging growth, namely:— £ October, 1911 ... ... 014,007 October, 1912 ... ... 953,202 Increase ... ...£339,195 On the other hand, however, tho imports for tho year have shown a moro than corresponding increase, tho figures being as follows: — Imports for tho year ended— £ September 30th, 1911... 18,611,9<30 September 30th, 1912... 19,615,291 Increase ... £1,003,331 LONDON MONEY MARKET. For many years to come New Zealand will be in a state of development, ! and consequently dependent to a largo i extent upon cheap loan money. In or- ! dinary times, the savings of tho peoplo, and the borrowings of the Government and of local bodies from abroad, enable this demand to be met; but, ow- | ing to the general unrest in Europe, to ' labour strikes and war clouds, with I lately the actual outbreak of hostilities j in the Balkan Peninsula, our principal source of supply—London —has been •practically closed to us for some months past, and it will probably bo some timo yet before tho loan propositions of any of our local bodies will meet with a favourable reception in the London market. The States of the Commonwealth of Australia are in the same position as ourselves in this respect. So long as this condition continues, it behoves all local bodies and other borrowers, having projects of expenditure on hand, to make their financial arrangements beforehand. MR. KENNEDY'S TRIP. I purpose paying a visit to the Old Country, leaving Wellington, this month. I expect to return to New Zealand in seven or eight months. During my stay in London I will have the opportunity of further familiarising myself" ( with tho Bank's business there. I will be able to confer with the shareholders there on tho matters abovo referred to, and I hope to come back, furnished with fuller knowledge than I at present possess to assist the Board in its deliberations on the important questions affecting the interests of the Bank and those of the shareholders, which may fall to bo dealt with next year. MR WATSON'S VIEWS. Mr William Watson, in thanking tho shareholders for again re-electing him to the Board, said: — In view of the legislation -which the Board are of opinion should be applied, for to be enacted early next Parliamentary session, it will be well for you to carefully consider your requirements j and to formulate them. The principal objects to bo desired are. freedom to increase capital,, renewal of tho £1,000,000 guaranteed stock maturing in July, 1914, and greater representation on the Board of Directors. INCREASED CAPITAL. With regard to increase of capital, our solicitors are of opinion that, notwithstanding the general Banking Act

of 1908, a further Act of Parliament is necessary. The provisions may bo the subject of considerable diversity of opinion, and it is of tho very first importance that tho Bank's shareholders in Great Britain. Australia, and New i Zealand should havo ample knowledge of tho situation, and opportunities to discuss and resolve upon it. At tho meeting of shareholders on lGtli June, 1911, the Chairman gave a review of tho history and a tab.c of figures showing the position and business from 1862 to 1911. I shall now supplement that review. £ Tlio capital subscribed and written off was ... 1,500,000 Premiums paid on certain shares, written off 276,427 Roservo liability paid up and written off ... 457,016 2,233,4(3 Present ordinary share capital paid up and carrying £500,000 further liability ... 500,000 Amount paid in by ordinary shareholders 2,733,473 THE LEGAL POSITION. It is lega'ly held, and has been stated in Parliament by a former Prime Minister without controversion, that the reserve fund and goodwill of tho Bank belong to the ordinary shareholders, and this must bo the view taken by all fair-minded men. In tho present circumstances tho benefit you derive from these magnificent assets is £2 14s lOd per cent, on the money actually paid in, and for many years you derived nothing at all., I have had numerous communications from shareholders suggesting that, as in other institutions, the capital lost in times of adversity should oo replaced from profits in times of prosperity, and I cannot regard their views as either unfair or unreasonable. In Australia, when the same wave of depression compelled several Banks there to close their doors, legislation was passed by which they were rehabilitated without liability by the State, or recompense to it beyond warding off financial trouble In" this Dominion different arrangements were made, whereby tho Stato did incur temporary liability, and they are so well known' that I need not recapitulate them hero beyond saying that, besides certain guarantees, the Government, without loss to the State, took £500.000 in preferred shares, bearing 3. per cent, to bo paid off at the Bank's option. Theso were paid off in 1900, and for a few years tho Government held no share interest whatever in the Bank. I PREFERRED SHARES. ! Tho preferred shares so paid off, or re-purchased, were held by the Bank, in terms of the Act, available for reissue at the Board's option, and had tho Board decided upon re-issue, the shares would, as prescribed by the Act, have been offered in tho first instance to the ordinary shareholders rateably. The latter provision clearly recognised and safeguarded tho right of tlio ordinary shareholders to bo the proprietors of the whole of tho shares in tho Bank, both ordinary and preferred. This right continued, in existence until it was withdrawn in consequence of legislation passed in the year 1903. Tho ten years for which the Government lent assistance to the Bank were expiring in 1904, and legislation was sought—in the session of 1903—for a renewal of it, but to only about half the extent of what was given previously. At tho time, viz., in 1903, tho Bank was doing so well that, three years afterwards, it paid off all its liability in respect of the Assets Board, and there only remained tho £1,000.000 guaranteed stock for which the State had any liability. _'or that partial renewal the Government at first demanded to be allowed to purchase £500,000 fully paid shares to bo called "Stato shares/ which wero to rank equally with the ordinary shares for dividend and for all other purposes, but to confer no voting power. They also asked for a commission at the rate of 1 per cent, per annum on the amount guaranteed. These onerous I terms were strenuously objected to. and J

it was ultimately arranged that the then existing preferred shares should bo cancelled and that the Stato bo permitted to take tip £500,000 preference shares in the then flourishing institution, on a sliding scale as regards dividends; the yield on the investment being 5 per cent, at the beginning, with rapid increases, until two years ago it. reached the maximum of 10 per cent., which has since been the rate paid. This was conceded without —so far as I am aware —any strong grudge on the part of the shareholders. But it was understood then that the concession was a full one from a business standpoint, and it was expressly agreed to be full and final compensation for any claim the Government had for tho assistance it had given and was to give; and proof of this agreement can be produced if necessary. THE CUAJIAXTE'ED STOCK. "With regard to tho £1,000.000 Guaranteed Stock, the Bank is now quito able to redeem it from its own resources: but seeing that we do not tako any fixed deposits in Great Britain, and that good business might have to be curtailed in eonsequenco of redeeming it. 1 am of opinion that, as much in the interests of the Dominion as of the Bank, it should be continued. As it bears interest at 4 per cent., however, that is .is much as tho Bank should have to pay for it. THE EQUITIES OF THE CASE. I again stato here what I havo said in this place before, and what is known to most shareholders, that the money lost by the Bank went in most part to develop the Dominion of New Zealand, and that tho help the Government gave has not involved the country in the loss of a single penny. The position and equities of the caso being known to you, I have no doubt you will safeguard your interests by communicating your concerted views to your representatives in good time, to enable them to make the representations you desire in tho proper quarter an'l at the proper time. Mr Kennedy is shortly proceeding to England, and as about half the shares aro held by residents there, I trust that the opportunity will be taken by a committee of the British shareholders to favour him with their views. On his return to New Zealand the shareholders in this country will have an opportunity to express theirs in general meeting before tho next session of Parliament. THE BRITISH SECURITIES. A discussion took placo on tho question of reserve securities held in London. Tho matter was introduced by Mr Macintosh, who asked: — What is the expenditure of the British Government securities held to tho value of £500,000 as part investment for reserve fund? What was tlio cost of these securities, and what is their market value to-day ? Jf there has been any depreciation, has full provision been made? When was purchase made, and at whose instance? Did it havo tlio approval of the London Board ? The Chairman said it was most undesirable that such detailed information should bo given—not that thero was any difficulty in replying, but the, establishment of such a precedent would bo a very bad one. Mr Kennedy added : May I ask MiMac In tosh to accept my assurance that on all the securities held by the Bank ample provision has been made,,at tho .end of each financial year for such depreciation as has occurred in the value of such securities during the , yenr. That course has always been followed. Mr Macintosh thanked the chairman for such information as he had given, but said that his point was should tho Board invest in speculative securities? It did nob matter to him whether tho question was answered or not, but the shareholders ought to know whether tho- course adopted should havo been followed. The Chairman said he had supported tho course. Ho was in London in 1007, and saw a good opportunity for investing in Government securities, nnd tho Board here authorised the London Board to do it. To tho Bank it was better than stock at current rates in tho ordinal-*; market. A shareholder asked whether British stock wan "highly speculative stock?" Tho Chairman: "Thero is scarcely a bank in Australia that does not do it. If anyone calls consols 'highly speculative' the probability is that we havo some of them." No doubt they had taken a downward tendency jn valuo, hut tho Bank cot tho same rate of interest.