Pearson airs BNZ’s ‘four foolish years’

Press, 27 July 1989, Page 35

Pearson airs BNZ’s ‘four foolish years’

By PATTRICK SMELLIE in Wellington The Bank of New Zealand’s “four foolish years” were flailed in public again yesterday by its outgoing chairman, Mr Frank Pearson, at the annual general meeting in Wellington. The meeting was the first gathering of shareholders since the bank announced its $633.4 million loss for the last financial year, and bad and doubtful debt provisions of $1.29 billion. Concentrating little on the future of the bank, Mr Pearson was at pains to point out that its losses were confined to its Investment Banking Group.

“What needs to be stressed is that the 95 per cent of our employees who work for the network or retail bank continued to make profits last year even after absorbing its own provisioning exercise,” he said.

The IBG losses had been “most specifically in large Australiasian entrepreneurial and property exposures, and, to a lesser extent, direct share stakes, plus a couple of large North American loan provisions.” Mr Pearson said he knew many shareholders were outraged that those responsible for the mistakes, and those who were behind the failed loans, were not being identified. "However, we continue to take the view that the long-standing policy of banker/client confidentiality represents the best interest of the bank. “It could well be that a time will arrive in the demise of past high-flying local companies that allows some encyclopaedic list to be published. “However, that point has not arrived,” Mr Pearson said.

The bank had reconsidered its policy regarding recovery of loans in arrears, and took the view that in many cases recovery was better where the company was allowed to continue trading. The bank’s deputy chairwoman, Dr Susan Lojkine, said the bank had been recruiting experts in the credit control field.

There was a distinction between bad and doubtful debts and poor performing loans, she said.

While there was some overlap between the two, she revealed that total poor performing loans currently totalled $1.5 billion.

The bank was concentrating on a rebuilding phase, which included reassessing its involvement in Australia, she said.

Mr Pearson said it was not possible to give a profit or loss projection for the year at this stage. Also at yesterday’s meeting, shareholders approved the appointments of Messrs Michael Fay and Geoff Ricketts, and Dr Robin Congreve as directors of the bank.

All three are directors of Capital Markets, which yesterday gained shareholder approval to take a 29.5 per cent stake in the bank, valued at $4OO million. Mr Syd Pasley was also appointed to the board, and succeeds Mr Pearson as chairman.

Approval for the placement of $2OO million of "near-capital” to boost the bank’s capital adequacy ratios above Reserve Bank standards was also given. The total injection of $6OO million new capital was made necessary by the bank’s losses.