TRADING BANKS’ EARNINGS

Dominion, Volume 29, Issue 220, 13 June 1936, Page 13

TRADING BANKS’ EARNINGS

Dairy Produce Finance

EFFECT OF RECENT LEGISLATION

Recovery in the Dominion

"Various factors which will tend to decrease the earning-power of the bank” were dealt wii.il by Sir Geoige Elliot, chairman of directors, In his address to shareholders at the annual meeting of the Bank of New Zealand yesterday.

Some of the legislation passed by the Labour Government directly affected the trading banks, he said. “For instance, they are to lose from August 1 next the handling of the exports of dairy produce, and should wool and meat come under the Government’s guaranteed price and marketing scheme, the effect would be that the banks would be entirely deprived of the normal means of replenishment of their London funds and would have to purchase all their exchange requirements from the Reserve Bank of New Zealand. I need hardly say that the Government’s proposals in this direction will seriously affect an important branch of the trading banks’ business, a business they have developed and carried on since the earliest days of banking in New Zealand.” FinanYug Dairy Exports. The main provisions of the of the Reserve Bank of New Zealand Act, as recently amended, and of the Primary Products Marketing Act were outlined by Sir George Elliot, who said that one effect of the latter measure would be that as from August 1 the financing of all dairy produce exported from New Zealand would be undertaken by the Reserve Bank of New Zealand on behalf of the New Zealand Government instead of by the trading banks on account of the dairy companies as in the past. “The trading banks have played an important part in financing and developing the dairy industry from the inception of the co-operative scheme in New Zealand, and it is not too much to say that but for the assistance given by the banks, the dairy factories as a whole would not be in the flourishing position they are to-day. “In view of the services rendered to the dairy industry, it is to be regretted that the Government, in framing its proposals, has decided to take away from the trading banks an important portion of the dairy produce finance which in the past lias been handled, by them with satisfaction and at a modest profit. “The loss of the London exchange in connection with exports of this produce will make unprofitable the working of some of our branches, the existence of which has been justified only because of dairy factory connections.”

Trade and Banking Position,

A lengthy survey of the trade and banking position of the Dominion was made by Sir George Elliot, who pointed out that the total trading banks’ balances with the Reserve Bank at March 30 amounted to £8,937,618, or, say, 15.600,000 in excess of the statutory balance required to be deposited. In addition, they held in London assets in connection with their New Zealand business aggregating the sum of £14,143,369 (N.Z.). The trading banks were therefore in a position to materially extend their lending operations in New Zealand.

The London funds of the Reserve Bank of New Zealand and the funds of the trading banks held in London relative to their New Zealand business, together amounted to over £38,000.000 In New Zealand currency—a position of considerable strength. Further progress toward economic recovery had been made during the year. Trade had been more active The yield from sales tax showed an increase of 13.7 per cent, over the pre vious year. Building activity was greater. Unemployment figures had been reduced. On provisional figures the Dominion internal revenue for the year was £20,170,000 (exceeding estimates by £430,000). and expenditure £25.900,000, giving a surplus of £270,000. In conclusion he emphasised the urgent necessity of facing the fact that for New Zealand the United Kingdom was practically its only market. “If due regard is paid to the manifest advantages pertaining to a closer reciprocal trade relationship with the Mother Country, and if that teciproca! trade relationship is wisely fostered. New Zealand, with its genial climate and fertile soil, should find that general prosperity is. not unattainable,'' Efficient Services. Speaking on behalf of the shareholders, Mr. Stronach Paterson express ed thanks to the directors, general manager and staff of the bank for their very efficient services during the past year. The directors and general manager, in shaping and implementing the policy of the bank throughout the uncertainties of the immediate past, had had an exceptionally difficult job. "Twelve months ago,” said Mr. Paterson, “there was certainly promise of improved export prices, and of improved internal trading conditions, and consequently of a less stormy passage than had been experienced in the- two or three preceding years. This promise has been realised, but the advantages have been greatly offset by political and financial uncertainty. The volume and the importance of recent legislation, hurriedly enacted, affecting finance and banking, are as great as its intention. Its objectives and its ulti mate effects are at present obscure When the Government’s Budget is pre seated, and as the Government proceeds to implement recent legislation, this uncertainly will be diminished, possibly even completely dispelled. “We can ojily hope that the actual putting of the Government's policy into effect will be guided by prudence and discretion, and that the dangerously wide powers which recent legislation gives to the Government will not be used in such a way as to endanger the stability and prosperity of financial and trading enterprises such as this bank, in which the Government itself is the largest of its shareholders and proprietors. Handicap of Uncertainty. “Meantime," said Mr. Paterson, “this uncertainty is a grave handicap to all commercial and financial enterprise, and must continue to be a very grave anxiety to the directors and the general manager of the bank. We hope for their sakes, as well as for our own, that this uncertainty will soon be dispelled,

and that they will be able to set and pursue a course that will result in the current year in as great, or even greater, success than has been achieved in the past year. “As regards the staff, there is nothing more essential to the continued success of the bank than that it should have a conscientious, efficient, loyal and contented staff. Shareholders are convinced that the bank has such a staff, and congratulate themselves accordingly. The staff has carried its full share of all the difficulties that have had to be mot in recent years, and is entitled to its full share of credit for the successful surmounting of those difficulties.”

Mr. ('. J. 8. Harcourt, who endorsed Mr. Paterson’s remarks, said the share holders and the bank’s customers, as well as the public generally, were well satisfied with the way in which they had been served by the staff.

The chairman returned thanks on I behalf of the directorate, and the ; general manager, Mr. F. W. Dawson, i on tiehalf of the staff. Mr. Dawson | said he himself felt the bank had an ' exceedingly good and perfectly loyal i staff, and he was quite sure they would > stand by the bank at all times. The . managers had had a most difficult time , during the past few years, and hr i thought that they had carried out their difficult duties exceedingly well. lie ! might state that from time to time be I had received letter from the bank’s ; customers, voicing their appreciation of the sei vices of the staff. I