C.B.A. concern over policy

Press, 4 September 1980, Page 18

C.B.A. concern over policy

PA Wellington Concern about what might happen if rates continue to fall significantly below the rate of inflation” has been expressed by Mr W; J. Gough, the manager for New Zealand of the Commercial Bank of Australia Limited. • Mr Gough, in a statement detailing the C.B;A. New Zealand results for the year ended June 30, sounded a note of caution about the direction of monetary policy. If . 'interest , rates continue to fall below the rate df inflation unchecked it “could lead to an allocation of lending resources to less efficient sectors of the economy,” Mr Gough said. He said “bank lending policies are now well attuned

to the need to direct lending to the high priority sectors” — export, import substitution industries and others essential for the smooth running of the economy and country. The C.B.A. New Zealand trading bank results show an increase in earnings of 30.2 per cent for the year. Net profit was $2,570,000, as compared to the previous year’s $1,974,000. An income tax expense of $2,567,000 (previous year $1,372,000) and extraordinary items amounting to $103,000 ($46,000) were allowed.for before the net profit figure was calculated. Mr Gough said that improved returns from foreign exchange, higher fees and commissions, and increased levels of business, were the main contributors to the increased profit. Margins were maintained at previous levels, notwithstanding the increased costs of funds resulting from the upward trend in interest rates, expecially in the first half. Demand for advances was relatively strong during the year, but particularly in the first half. The most buoyant sectors were import substitution and export industries.

Loans, advances, bills discounted, and other lending engagements rose $37.7 million (14.6 per cent) to $295.1 million, and deposits, bills payable, and all other liabilities rose $51.6 million (14.1 per cent) to reach $416.5 million at the year’s end. Total assets in. New Zealand stood at $590 million at June 30.

In looking at the current year, Mr Gough said that monetary conditions were unlikely to be eased much further. The level of free reserve assets in the banking system had increased from nil in December to $lOO million in May and this has had the effect of removing some of the pressure on interest rates for large deposits. “However, competition for small deposits has continued to be fierce as a large number of institutions compete for personal savings and the margins between rates for large and small deposits has; shrunk to historically low, levels. For example,- banks are quoting rates of up to 13.25 per cent for large deposits maturing at one year, compared with the 12 per cent for small deposits of the same maturity. As recently as January the margin between these two rates

was as high as three per cent” ' .

Mr Gough Lalso ' jgave details of performance during 1979-80 for The ‘ Commercial Bank Savings ' Bank (N.Z.), Ltd. Net profit after tax was $516,000 compared with $416,000 for the previous year. Deposits grew by six per cent to $67 million at Juije 30, 1980. ,

The C.B.A. group previously reported a world-wide net profit including extraordinaries, of $Au5t39,903,-000 (5NZ46,725,000) for the year, ended June 30, 1980 — a 7.8 per cent increase over the previous year, , .