UNION BANK OF AUSTRALIA. (From the Money Market Review, of 19th January, 1878.)

Evening Post, Volume XVI, Issue 79, 16 March 1878, Page 1 (Supplement)

UNION BANK OF AUSTRALIA. (From the Money Market Review, of 19th January, 1878.)

The half-yearly meeting of the shareholders in the Union Bank of Australia was held on Monday, in the board-room at the offices, Bank Buildings, Lothbury, for the purposes ot receiving a report and statement of accounts and declaring a dividend. Mr. John S. Hill presided, and there was a large attendance of shareholders. Mr. W. R. Mewburn, the manager, read the report and balance-sheet, which were as follows: — Supplementary report of the directors of the union Bank of Australia, presented at the special general meeting of the proprietors, held on the 14th January, 1878. — The directors have much pleasure in reporting . that the accounts of the bank now presented have admitted, after ample provision for every bad and doubtful debt, of the declaration of a dividend of 7 per cent, for the half-year, and of a bonus of 53 per share, being together at the rate of 16 per cent, per annum; and further, of the transfer of the sura of £25,060 to the reserve funds, in pursuance of the policy adopted at the annual general meeting in July last. This gratifying result of the half-year's operations will sufficiently assure the proprietors of the highly prosperous position of the bank's affairs. Notwithstanding serious drawbacks, arising from severe and protracted droughts, from a diminished gold yield, and a dull state of trade generally, the various industries and enterprises of the colonies continue to be steadily developed, and to afford an excellent field for the employment of bank capital. The valued exertions iv the bank's interest of tbe general manager, of the other principal officers, and of the staff generally at home and abroad, entitle them to the best thanks of the directors and proprietors. The annexed balance-sheet presents a net amount of profit of £131,800 0s Id, out of which the sum of £-25,000 has been transferred to the reserve funds, and the balance, viz., £106,800 0s Id is available for division. Of this the dividend and bonus will absorb £100,000, leaving £6800 0s Id to bo carried forward. The dividend warrants will be transmitted by post on the 21st instant, and the dividend and bonus will be payable in the colonies, at such time as the general manager shall fix after the receipt of telegram. The directors have now to refer to the important measure which, after much consideration, they have resolved upon and communicated by circular to the proprietors — viz., the issue of 10,000 new shares at a premium of £33 per share. By this measure £250,000 will be added to capital, which will bring the total paid up to. £1,500,000, and the transfer of the premium to the reserve funds will increase these funds to £780,000, thus permanently strengthening the position of the bank and the security of the proprietors. Since the capital was last added to, fourteen years ago, the deposits and circulation have risen from £2,946,000 to £6,721,000, and the local bills and other advances from £4,067,000 to £7,708,000. Having regard to these facts, to the continued growth of colonial industries which are constantly extending into new localities, and to the wide area over which the bank's operations are spread, the directors consider that the additions to capital and reserves now proposed are necessary for the present and prospective business of the bank, and they, therefore, earnestly and confidently recommend the measure to the -adoption ot the proprietors. The -following is a statement of liabilities and assets at the branches on the 30th of June, and at the London office on the 31st of December, 1877 :— liabilities. £ s. d. Circulation 381,316 5 0 Deposits 6,340,311 8 5 Bills payable and other liabilities (including reserves held against doubtful debts) ... 1,123,466 13 5 Balance of undivided profits.. 106,800 0, 1 Reserve fund as per contra ... 250,000 0 0 Building and other reserve funds 200,000 0 0 Capital 1,250,000 0 0 9,651,894 6 11 assets. £ s. d. Special on hand, and cash balances 1,815,565 8 1 Bullion on hand and in transitu 74,491 16 9 Bank premises and property.. 187.993 14 8 Government securities ... 114,961 6 9 Local bills, bills receivable, and other securities ...7,708,879 0 8 Reserve fund, invested as per statement 250,000 t) 0 9,651,894 6 11 STATEMENT OF PROFITS. £ 8. d, Balance of undivided profits at 30th June, 1877 104,367 12 7 Out of which a dividend and bonus were declared of ... 100,000 0 0 . Leaving a balance of ... 4,367 12 7 Profits of the past half-year, provision for all bad and doubtful debts, £186,222, 11s. Less: Remuneration to the local directors and salaries and allowances to the colonial staff, £36,616 7s 7d ; general expenses in the colonies, including rent, taxes, stationery, &c, £12,617 9s lid ; remuneration to the board of directors, salaries of London office staff, rent, taxes, stationery, and general expenses, £8,282 19a 3i; income tax, £1273 6s 9d— £58,790 3s 6d 127,432 7 6 131,800 0 1 Deduct : Amount transferred to building and other reserve funds 25.000 0 0 Balance of undivided profits at this date 106,800 0 1 RESERVE FUNDS. £ S. d. New Zealand Imperial Four per Cent Debentures . .., 200.000 0 0 Colonial Six per Cent. Debentures ... „, ... 50,000 0 0 250,000 0 0 Building and other reserve funds ... • 200,000 0 0 Total reserve funds ... 450,000 0 0 The Chairman said — Gentlemen, I could have wished that on this, doubtless the most important occasion in the history of the bank, tbe chair bad been occupied by one of my more | experienced colleagues. At the same time my task is lightened by the belief that the statement of accounts which we are now able to submit must be as satisfactory to you as it is gratifying to ourselves. lam glad to have an opportunity of expressing my conviction that the operations of the bank combine in themselves all the elements that constitute success in business. They are safe, profitable, and they are progressive. (Hear, hear.) As to their safety you must receive my assurance that the accounts of every branch have been minutely examined by a committee ot the Board, and that as a result you may rely upon my statement that the most ample provision has been made for every bad and doubtful debt, from which, thanks to the prudent management of our affairs in the colonies, we continue to keep, I am glsd to say, remarkably free. As to the profitable nature of pur operations, you can best judge of that from the circumstance that we are enabled to pay a dividend of 16 per cent , besides adding £-25,000 to our reserve fund. As to the progressive nature of our business, I will trouble you with a few figures, whichare, L think, as remarkable as they are satisfactory. I have gone through the last six half-} ears, and I find that the assets and liabilities of the bank were^s follows :— On the 30th of June, 1875, they amounted to £6,985,203. On tbe 31st December in the same year they were £7,091,494. On the 30th June, 1876, they had risen to £7,983,680, and on the 31st of December of that year they had further risen to £8,343,068. On the 30th June last year they figured for £9,055,612, and from the statement

! of accounts submitted to you, which is made up to the 31st December last year, and to the 30th June in the colonies, you will sco that the amount had risen to £9,651,894; whilst if we coulil submit to you a statement extendeding up to the present date, the total would be doubtless increased to over £10,000,000. | (Hear, hear.) Gentlemen, in the report which ha 3 just been read to you we have unfortunately been obliged to revert again to the partial continuance of the drought from which somo portions of the colonies have suffered now for two seasons. But although we sympathiso with the many individual cases of severe loss which have no doubt occurred, yet we are aware that at no time has the pastoral interest generally been more sound than it is at present, nor has it over been better prepared to meet such a calamity, preceded as it was by several exceptionally good years. (Hear, liaar.) Further, we mus<] recollect that whilst the pastoral interest will at all times probably continue to be the most important one in Australia, yet otlior interests are now rapidly extending themselves South Australia and New Zealand are already large exporters of cereals, while New South Wales, Queensland, and Tasmania, which last has hitherto appeared to be the most stagnant of the colonies, are steadily developing their vast mineral resources, and Queensland is successfully producing sugar and other tropical products All this points to an increased demand for money, an increased demand for that capital which it is the business of an institution such as this to supply, and from which we may look for continued and enhanced profits so long as our operations are conducted in the colonies with prudence and care. This leads me to remark that the paragraph in the report relating to the services of our staff generally is no mere idle complimont, and I know it is as much appreciated by the gentlemen to whom it refers as I am sure it is well deserved. (Cheers.) However strictmay be the regulations laid down by the board as to the conduct of our business, they would really be ¦ useless were they not ably seconded and efficiently carried out by the gentlemen at the head of our affairs, both in the colonies and at home. I Allude particularly to Mr. M 'Mullen, the general manager, and Mr. Palmer, our chief officer in New Zealand, and to our excellent manager in London, Mr. Mewburn. (Choors.) With these few remarks, gentleman, I turn to the most important paragraph in the report, that which refers to the proposed increase of capital— a measure upon which the directors have resolved, after the most mature consideration, as being one calculated in their opinion to promote the best interests of the proprietors ; and it is satisfactory to us to believe that the shareholders generally approve of the course we propose to adopt, judging Irom the large number of proxies which nave been forwarded to us in favor of it. It will probably be in the recollection of the shareholders present that in 18G3, when our capital was last increased, authority was given to the then board to add £500,000 to the capital, which then stood at £1,000,000. But at that time only £250,000 was issued, and when you consider the few statistics with which I am about to trouble you, you will, 1 think, agree with me as to the wisdom of the course which the directors now propose to follow, of adding £250,000 to the capital, besides transferring a large amount to the reserve fund, which, in an institution like ours, constitutes such an important element ot safety to the shareholders. Comparing 1863 with 1876, the last year for which wo havo any statistics, 1 find that whereas in 1803 the total population of the Australian colonies and New Zoaland was under 1,200,000, it has now increased to 2,400,000. The imports stood in the former year at £34,000,000, and they have now risen to £45,000,000. The exports stood at £28,000,000, and they havo now Tisen to £43,000,000. (Hear, hear.) I may here point to the remarkable change in the relative position of the two principal articles of colonial export— gold and wool. In 1863 gold was exported to the value of £11,000,000, whilst in 1876 the amount had sunk to £8,000,000. On the other hand, while in 1863 the value of the wool exported was £6,000,00), in 1876 it was no less than £19,000,000. (Hear, hear.) Well, gentlemen, continuing the statistics, 1 find that in 1863 there were in the 'colonies altogether 31,000,000 sheep, and there are now 62.000,000. There wore then 4,000,000 of cattle, the number is how over 7,000,000. The total of the revenues of the several colonies in 1863 was about £7,000,000, and is now £16,000,000. The total number of acres under cultivation was then 2,600,0.00, and it now amounts to 6,600,000. Finally, the debts of the colonies now amount to about £60,000,000, invested for the most part in reproductive works, including 3000 miles of railway, many of which are paying more than the interest on the cost of construction. (Hear, hear.) Gentlemen, I think these statistics are more convincing than any arguments I could use as to the wisdom of the course which we recommend you to adopt. But before sitting down I wish to anticipate two or three objections which may be made to that proposal. I know it has been said that, admitting the truth of j all such facts as I have been stating, we ought to have earlier foreseen the necessity for such a measure, and to have given an earlier intimation of our intention to recommend its adoption. Now, gentlemen, I frankly admit that, while we have been gratified to observQ how our business has increased, we did np,t anticipate that it would increase in such a rapid ratio as it has lately been doing, and this has been occasioned partly by the policy of the Government of New South Wales, and also that of Queensland, in throwing open large areas of land for selection. lam glad to say that we number amongst our constituents a body of gentlemen who are second to none in Australia for wealth and for position. When these gentlemen came to us with a desire to convert their pastoral tenancies into freeholds, they naturally look to us to afford them a reasonable amount of assistance, and if we are not prepared to render it they will take their business elsewhere, a course which we are not prepared to allow. Again, I know an apprehension has been expressed that an addition, to capital very often means a diminution in the dividend. Well, gentlemen, that has been the case, I am aware, in some instances in the, City of London; but, if you consider the amouot that we propose to raise, you will find that, in order to maintain a 16 per cent, dividend, we have only to earn, about 7 per cent, on the sum with which we shall be entrusted, and 7 per cent, is a very moderate percentage to earn in the colonies. Finally, I would remark that the last, and perhaps the most important objection to our scheme is that which has been raised by a few shareholders, that we ask you to give too high a premium. (Hear, hear, and No, no.) To that objection I may reply that amongst the largest shareholders in this institution are gentlemen sitting on this side of the table, and that it would hare been most welcome to us to have proposed the issuing of new shares at a lower premium, had we considered merely our own personal interests; but in the course which we have adopted we have looked solely to what we believe to be the . future interest of the bank. I have told you "frankly that we want this money ; we see our way profitably to employ it j and after very full consideration we bare unanimously come to the conclusion to -fix the price of issue at £58, as being under all circumstances fair and reasonable ; and I trust and bslieve you will accord to us your approval of the course we have adopted. With these remarks, gentlemen, I beg to propose that the report and statement of accounts be received and adopted. Mr. William Botly, in seconding the motion, thought that the shareholders generally would be extremely gratified with the report and the progress which the bank had made. At one time he had thought that the premium asked on the new issue of shares was too high, but after hearing the remarks of the chairman he was prepared to entirely and thoroughly endorse the action of the board. The price of issue was such, to his mind, as would keep shares in the hands of investors, and not allow the profit to go into the hands of jobbers, and dealers, as was too often the case. Mr. Wilkinson gave only a qualified support" to the report and the increase in the capital, as he feared that it would lead to a decrease in the future dividends. He also objected to such a large increase in the- reserve fund, because it was to his mind undesirable to entrust any body of the gentlemen with a large sum of money which was not supposed to earn

interest. He urged the board to reduce the premium upon the new shares to £30 per share. Mr. Balfour hoped that tho board would not take any lower premium for the new shares, because he looked upon it as a proper security for existing shareholders. After some further discussion of a conversational character, Mr. Campbell (a director) said that he must support the adoption of the report, for the simple reason that the increase in the capital was foreshadowed by himself when he addressed the shareholders from the chair a year ago. He told them Uion of the enormous resources of the Australian colonies. He told them that the exports were greater than any comparative exports in the world ; they consisted of natural productions, and were not affected by any manufacturing interests, which, unfortunately, this country was subject to; and therofore they would require all their means to support their businoss. His friend Mr. Fanning, who filled the chair Ist J uly , told them they could not stand still ; they must go on, or they would become a secondrate institution, which they were not disposed to do. Since then the colonies had increased in wealth, and it bad come to this, they must either increase their capital or reduce the best and soundest business in the Australian colonies. The Chairman said the moasure had not been decided upon without the most mature consideration, and the board were therefore not prepared to make any reduction in the premium proposed. It was the full intention of the directors to carry all the premiums received to tho reserve fund, and though, owing to the expansion of the bank's business, branches were opened where and when necessary, there was no special intention of increasing the number consequent on tho proposed enlargement of the bank's capital. The report and accounts wore then adopted, and the dividend declared.