THE UNION BANK OF AUSTRALIA, Limited.

Evening Post, Volume XLVIII, Issue 67, 17 September 1894, Page 4

THE UNION BANK OF AUSTRALIA, Limited.

_ + (From tho Money Market Review of August 4, 1894.) The Annnal Gonoral Meoting of this Bank was hold an tho 30th nit. at tho offices. Bank Buildings,' Lothbury, under tho presidency of Sir Kobert G. W. Herbert, G.C.B. Mr. W. R. Mcwbnrn (manager) read tho notioo oalling tho mooting, and tho report of directors and statement of accounts, as follows, were taken as read :—" Tho dirootors have to submit to tho shareholders tho (Minexod balance-sheet of tho Bank to the 28th of Fobruary last, duly audited, which exhibits a net amount of profits, inclusive of tho balance brought forward from previoun half-year, of i! 50,743 18b, admitting of a dividend at tho rate of 6 per cent, per annum, equal to 15s per share, which will absorb .£45,000, and leave .£14.743 18a to bo carried forward. The directors havo, as customary, carefully investigated the business of tho Bank, and in consequence of the continued depression in tho colonies thoy have again mado unusually largo provision for doubtful dependencies. Tho direotors havo to report that branches have boon opened at Cue and Coolgardio (Western Australia), and that tho branches at Roho (South Australia) and Fortitude Valley (Brisbane, Queensland) have been dosed. Tho diroctors have, with mnoh rqgrot, to report tho retirement, owing to failing hoalth, of thoir ostoomod colleague, Fredoriok Gonnorman Dalgoty, Esq., which was soon after followed by his death. Mr. Dalgoty 's relations with the Bank as a looal director at Molbourno, and - as-a member of this Board, oxtondod ovora period of 43 yoars, and hiß long oxporionco in, and large business connections with, tho Australatian colonies havo been of groat value to the Bank. The vacancy thus oroated baa been provisionally filled, in accordance with the deed of settlement, by the appointmont of Joseph M'Gaw, Esq., of Chil worth Manor, Surrey, who now offers himself for eleotion. Major Frederiok Fanning and John Sheriff Hill, Esq., are tho direotors who retire by rotation, in aooordance with the deed of settlement, and they now offer themselves for re-eleotion. The Bank's auditors, Albert Deacon, Esq., and Frederic Whinney, Esq., chartered aaoountant, also retiro, and offor themselves for ro-oleotion. Tho dividend warrants will be transmitted by post on Ist August, and the dividend will be payable in the ooloniea on such date as the general manager may fix after receipt of telegraphies advice. — By order of tha Board, W. R. Mewburn, Manager, 1, Bank Buildings, Lothbury, 21st July." Liabilities. £ a. d. Capital £-1,500,000 Less : Bcservou' liability 3,000,000 Paid up 1,500,000 0 0 Boaerved funds 1,000,000 0 0 Invested in— ■ Imperial Guaranteed Four per C'ont. Debentures . . £200,000 Local Loans (Imperial) Stock 50,000 Colonial Government and mnnicipal debentures . . . 250,000 Bank premisos and property 500,000 Circulation 403,796 0 0 Deposits (inoludlng inscribed stook deposits) 16,030,110 I 9 Bills payable and other liabilities (including reserves held against doubtful debts) ... .1,17.1,108 4 8 Salanco of undivided profits ... 59,743 18 0 £23,068,758 7 5 [There is a contingent liability— now reduced to £28,000— in respect of tho subscription to the guarantee of 18th November, 1800, in the matter of Baring Bros, and Co.'s estate.] Assets. £ s. d. Specie ou hand and cash balances 4,205,718 2 5 Bullion on hand and in transitu ... 106,993 17 G Slouoy at call aud short notice in London 256,500 0 0 Connols, Local Lonns (Imperial) Stock, and other stocks of or guaranteed by tho Imperial Government £648,851 It 5 Colonial and municipal Stocks ... 356,958 10 2 1,005,810 13 7 Bills receivable, loans, and other securities at London office ... 2,702,60-1 8 9 Bills discounted, bills receivable, *. loans, and other securities at the branches 13,994,129 5 7 Bank premises and property in the colonies 630,816 7 5 London leasehold premises £86,850 9 0 Eeservo" against same.. £10510 18 0 6 m'nths ' interest thercou ut3J% 183 18 10 10.65H 16 10 76,155 12 2 £23,068,758 7 5 Statement of Profit. • £ s. d. Balance of undivided profits at 31st August, 1893 „75,612 2 9 Out of which a dividend was declared of 60,000 0 0 Leaving a balance of 15,612 2 9 Profits of the put halfyear, after makiiigprovision for all bod and doubtful debts ...£166,917 2 8 £ess— Koinuiiera- . tion to tho local directors, and salaries and allowances to the colonial staff £75,815 11 10 General expanses in the colonies including rent, taxes, 8 tationery, Ac. ...30,559 11 0 Bom un oration to the board of directors and auditors, salaries of London office staff, rent, taxes, stationorj.and general expenses ...14,339 15 5 Income-tax 3,070 6 2 122,785 7 8 . 44,131 15 3 Balance of undivided profits at this date £59,743 18 0 Arthur Flower, C. E. BmauT, (n.( n . . John Desnistoon, f D ""cetora. John S. Hill, ) W. B. Mewbtjen, Manager. T. C. C. Sidmdehs, Accountant. ■London, 19th July, 1804. We beg to report that wo havo verified the cash, - investment, bills of ezohango, iind other nßsotu in London, and havo had access to the accounts sent to London from the various branches in the colonies, and -raring examined the same, and the books and accounts of tho London office, we are of opinion that the above balance-sheet is a full and fair balance-sheet, properly drawn up so as to exhibit a true and correct view of the state of the company's affairs as shown by the books of tho company. Fbedk. Whinhet, ") Chartered Accountant, [-Auditors. Albibt Deacos, _) The Chairman— l conclnde it to be yonr pleasure, aa usual, to take as read the report and balance-sheet for the half-year. (Hear, hear.) It now becomes my duty to recommend for yonr adoption the report and bal-ance-sheet for the half-year ending the 28th February, 1894. You will understand that I do not, of course, approaoh this duty with altogether the same satisfaction aa has boon f olt by my ptedooessors in this chair on most previous occasions, booauae, although your dirootora are glad to be able to congratulate you upon the very high position whioh the Union Bank of Australia continues to hold . among the leading finanoial institutions of Great Britain and the colonies, its strength and soundnesa being well maintained, and its prospeots aa I sincerely believe for the not distant future being very hopeful, it ia nevertheless the faot that the great reduotion in the business whioh tho Bank has been able to transaot, coupled with tha large amonnt of ooin which it holds unemployed, has made it necessary for your directors thia half-year to declare a somewhat rednoed dividend. The position of the Bank and the oironmstanaes nnder whioh that has beoome necessary are frankly and clearly stated in the balancesheet and statement of accounts. The direotors report that, aa customary, they have carefully investigated the business of the Bank, and in consequence of the continued depression in the colonies they have again made nnuanally large provision for donbtfnl dependencies. Ido not think it ia necessary 1 for me to enlarge on the great variety of cononrrent circumstances whioh have causod the depression ont there, whioh has existed for bo long a time, to oontinne up to the present date. At almost every Bank meeting there has been reference to the great difficulty of earning money, not only in the colonies, bnt in England and in all parts of the world, and yon may take it that I have no further light to throw upon that unpleasant part of the subject. Having made those large provisions the directors tell you that the balance-sheet exhibits a net amonnt of profits— inolusiye of the balanco bronght forward from provious half-year— of .£59,743 18a, admitting-of a dividend at the rate of 6 per cent, per annum, equal to 15s per ahare, whioh will absorb £45,000, and leave £14,743 18a to bo carried forward. You will remomber that six month a ago, when wo last met, tho profits of the Bank amounted to £75,612. and that we were able then to appropriate £60,000 of that to dividend, carrying forward a sum of £15,000. You are well aware that £15,000 is a 2 per cent, dividend, and, therefore, we have exaotly £15,000 lesa of profits to announce for the half-year ending February, 1894. than we had to announce for the previous half-year. That ia the simple story of the reduced dividend. In the balancesheet you will observe that the total of our aaaota has mounted np again to a figure moro nearly approaohing that at whioh it stood in February, 1893, when we had reached the very high total of £24,017,000, our total now being £23,068,000. We have still a very large amonnt nnder the head of speoio on band and cash balances, and bullion on hand — something amounting together. ' at the present moment, to upwards of £4,250,000. Of oonrse, if this could be profitably employed, or the greater portion of it, •we should, without inonrring any additional expense, be able to declare a much better dividend, and we should have earned much more money than we have at present. In oonneotion with the administration of the Bank, it baa been observed to us that the opat of administration bears a large proportion to tho amonnt of divisible profits and with regard to that I will only say that no doubt tnat is the oaso if you look at it in that manner, bnt that ia not the right way to look at the question. The point ia, what is the coat of administration as compared with the volume of business that the Bank and its branches have to deal with? The branob.es must be kept in working order ready to do a better business whenever the time for doing so preaents itself, and thoir expenses cannot be summarily ourtailod whenever the profits are not good. Itrnst the proprietors will see that that position does not require any further elucidation from me. Now, there is a subject aa to whioh the directors think it desirable that spooial reference should be made on this occasion, because it not only is attracting attention amongst the proprietors of this Bank and tSS proprietors of the late Bank of South Australia; DUt- it has eyen boen suggested

that our diminution in dividend to-day is roforablo to a profcractod and expensive liti^ataon we oxpeot to have with tho representatives of tho Hank of Pouth Australia. Now, thore i- absolutely anJ pntirely no foundation for that idea, j bat 1 will, with your pormisfion, occupy yoar time lor a fow minutes in fivinij you a utateraent of tho position in whii'h wo now Ftaud in relation to the Bank of South Anatraha, as you will nodoubt deß.re to know something of tho progress which has boon inado fc a dettloment of our accounts connected with the transfer to this .tank of the business of the Bank of South Australia. (Hear, hear ) Reference has been made to thi-i subject at each previous half-yearly meeting of tho proprietors, and it has been explained 1o yon that the valuation of tho assets of the Bank of Sonth Australia has been much protracted by tho Australian flnanciul crisis. That valuation has now boon nearly completed, and thoro ought to bo no difficulty in arriving at a final settlement. But it will bo convenient— especially as it was alleged in a report, aado on tho 11th of this month by a committee of shareholders of tho Bank ot South Australia " that tho Union Bank has shown no disposition to agrco to what the committee considored roaeonablo terms of compromise — that I should inform you, as briefly as poßsiblo of tho conditions under which it was agreed that this Bank should assume tho liabilities of tho Bank of South Australia. In April, 1892, that Bank went into liquidation, and by an agreement then entered into tho Union Bank assumed the liabilities of tho Bank of Sonth Australia, and took over corfcain assets (known as tho " A " assets) subject to valuation on terms carefully defined. In the evont of such valuation showing a deficiency below the liabilities as taken over, it waß agreed that the Union Bank of Australia should have a lien on certain other assets of the Bank of South Australia, known as the " exoepted " or "B " assets, standing, on 11th April, 1892, in the books of the Bank of South Australia at .£559,000, and tho liquidators further agreed — I am quoting tho words of the formal agreement— that, " if at any time the assets of the South Australian Bank in the hands of the liquidators shall not he sufficient to pay and discharge any debt due and payable to the Union Bank under these presonts, the liquidators of the South Australian Bank shall, so far an they legally can or may, make snob a call, or such calls upon the contributories of the South Australian Bank as may be necessary to raise the amount required to pay and discharge suoh debt or liability." Now the valuation of the "A" assets shows up to the present time — with interest and tho half of the valuation charges payable by tho Bank of South Australia —an approximate deficiency of .£400.000, and, aB admitted by the liquidators, tho actual value of tho " B " assets is so far below thoir book value that even if thoso"B" assets were taken over by the Union Bank, thore would still bo an unascertained but considerable amount to be made good to the Union Bank from some other souroo. This amount ia admitted to be at the present time upwards of .£250,000, exclusive of the '* B " assets. The Union Bank accordingly, on the 14th Mar oh last, j required the liquidators to mako a call on the oontributories of tho Bank of South Australia sufficient to produce the deficient amount, but the liquidators deolined to make any such call unleßS ordered by the Court. After considerable negotiation it was agreed, at the suggestion of the liquidators of the Bank of Sonth Australia, that tho Union Bank of Australia should apply for an order " for liquidation under the supervision of the Court," and suoh application accordingly came on for hearing before Mr. Jußtico Vaughan Williams on the 25th of April last, when tho oounaol of the Bank of South Australia, while raising no opposition to tho application, on boing asked by tho Judge whethor ho would join in tho application, stated that ho could not- do so without consultation with his principals, as by so doing he might facilitate tho recovery by the Union Bank of the debt duo to thorn. It was pointed out to tho chairman of the liquidators that this action on the part of thoir counsel appeared to this Bank somewhat surprising, in view of tho agreement to which tljey had *Bignod their names to liquidate the Union Bank's debt as they could or might, seeing that by joining in such application they would moroly be consenting to having the question of the liability of the Bank of South Australia's shareholders argued in Court. Ihe application was then adjourned for amendment of the petition. During this adjournment various proposals on the part of the liquidators of the Bank of South Australia were considered by our direotors, who, with tho object of settlement, wore even, as part of an amuigoment, prepared to make tho great coAcossion of taking over- of course ou terms sausfaotory to themselves— tho assets which had been excluded from the original agreement, and the shareholders' comtnitteo, appointed for consideration of tho matter, were willing to agreo to, within a comparatively modorate sum, the amount required by this Bank ; but as all they would undertake was to "reoommend" the shareholders to consent to a call of -£10 per share, it must be perfeotly obvious to you that such an arrangement could not be accepted by this Bank, as it was naturally impossible- for us to know what suoh call might produce. The application as amended for liquidation under supervision of the Court therefore came on for hearing before Mr. Jnstioe Vaughan Williams on the 18th inst , when the same counsel as had represented the Bank of South Australia on the previous occasion informed the Judge that the Bank of South Australia were deßirous of doing their duty to all persons interested, and the Judge then asked the counsel for the liquidators whether tho voluntary liquidators could not enable the possible difficulty to be got over by taking the initiative themselves— that is, by applying to the Court for its directions thempolves. The liquidators' connsel replied much to the same effect as on the former hearing — that he could not do so, as he might thereby facilitate the recovery of the Union Bank's debt. The Judge then intimated that he would postpone his further consideration of the matter, in tho hope that the liquidators would save him all trouble. Our solicitors have asked the advisera of tho liquidators whether they will adopt -the Judge's suggestion, but at present they have not assented to do bo. What the Judge's decision may be I of course cannot foretell; but as to tho nltimato issue of this Bank's claim on the Bank of South Australia for tho deficiency which has arisen yonr directors, aftor taking tho advico of most eminent counsel, can entertain no doubt whatever. The Bank of South Australia was originally incorporated under a charter undor which .£25 per share was callable on going into liquidation. In tho year 188 1 they registered under an Act of Parliament as a limited liability oompauy, with, a Bimilar reserve liability of .£25 per share, and on the strength of that reserve liability they Bought for and obtained deposits as a limited liability company. In this connection I wish to read to you claußO 7 of the special Act empowering the Bank of South Australia to register as a limited liability company. This clause ran as follows : — " Notwithstanding anything in the Companies Acts, 1862 to 1880, contained, the liability of the shareholders or members of (he Bank in the event of the powers of the Bank being determined as aforesaid, as well in respeot of notes issued by the Bank, subject as hereinafter mentioned as of other debts and liabilities of tho Bank, continue to bo in accordance with the limited liability defined by the said original charter, as amended by the said supplemental charter, that is to say, the extent thereof Bball be twice the amount of the subscribed shares as in tho said charter mentioned. Provided always that the limitation of the liability of the mombora of tho Bank in respect of notes issued by them shall cease and determine upon the expiration of seven years from the date of suoh registration as aforesaid, and thereupon section 6 of tho Companies Act, 1879. shall apply to tho Bank and the members thereof.' ' The seven y eara mentioned in the clause expired in December, 1891, so that the liability for the notes id unlimited. All this was explained in moat clear and emphatic language to the shareholders of the late Bank by their solicitor at meetings held on April 17 and November 13, 1884, at which time the late Bank decided to register under the Limited Liability Acts; but I do not gathor that this olanse was put before the shareholders of the Bank of Sonth Anstralia, or its purport communicated to them, when the matter was discussed at their meeting on the 11th instant. I have tronbled yon with these particulars because I am anxious that you should be able to arrive at your own conclusions as to the quarter from whence proceeds mnoh of the delay in obtaining a settlement of this matter, and also that you should see that we feel no anxiety as to the result when arrived at. Then as to the merita and prospeots of the transaction as a whole— as to which you will also wish to hear something from me on tho present occasion—the direotors see no reason to believe that it will be other than an advantageous one to this Bank, though, of course, at the time of concluding the agreement no one could foresee the crisis of last year and consequent further depreciation in values. The accounts were taken over at a careful valuation, and are being conservatively dealt with, and, when deemed advisable, are being realised as opportunities occur. (Applause.) Continuing, the chairman said that ho presumed they looked to receive from him somo reference aB to the condition of affairs that they might look forward to in Australia. After the severe depression that had existed thore they could not expect the reaction to be brilliantly abrupt, but thingsi were certainly improving, and the outlook was hopeful all along the lino. The season had been good for stook, and the flocks and herds were abundant. The price for wool had been a little better, and it was hoped that the tariff revision in the United States would allow of the import of wool free, which would be a very important matter for Anstralia. Th regard to the froien meat trade the Australians were pushing the business very actively, and were invading the Continent with supplies in Austria, Germany, and Belgium, and he believed even in France, despite the high duty there. In Queensland the sugar soason had ' ooen very good, and butter and farm produce was largely coming forward from the southern colonies. As to gold the moat sensational field was Western Australia, and the result was to attraot labour to that part, and thus to relieve the pressnre of population in the eastern colonies. He did not know that there were any other matters in regard to the business of the Bank that called for partionlar comment, but there were one or two what he might call personal matters to which he would like to allude. As stated in the report, the Company had Buatoined a very groat losb in the retirement and subsequent death of Mr. Dslgety, one -of the oldest and most valued of their direotors. He had been connected with the Bank for forty-three years, and when he oame to England in 1856 was elected a member of the London Board. The Company had sustained a very great loss in Mr. Dalgety's death, and to fill the serious vacancy that had thus been oooasioned they had elected, subject to the approval of the shareholders, Mr. Joseph M'Gaw, who had had a long experience in the colonies, and had already proved himself of valne to hia colleagues. Tho Chairman then procooded to pay a high tributo of praise to the serviooa rendered by the staff at Home and abroad, including Mr. Mewbarn (the London manager), Mr. Carbery (the asßiatant manager), Mr. Selfe (the aeoretary), the managers of the

branches, and more particularly Mr Finlay Bon (the goneral manager in the colony), whom, he said, they had the pleasure of having present with them that day, and who would no doubt offor a few remarks later. During hiß sojourn in England Mr. Finlayaon had been of very gieat Hervice to the Board, who had kept him hard at work. After expressing bis willingness to reply to any questions, the Chairman conoluded by formally moving the adoption of the report and accounts. (Cheers.) . , iU Mr. Sebag Montefiore seconded the motion, and eaid that they were all encouraged in the hope, from what they had heard from tho Chairman, that they might look forward to an early return to prosperity. In reply to a question as to the Btato of the Baring Guarantee Fund, tho Chairman paid that it still stood at .£25,000 in their accounts, tho samo as last year ; but he understood that considerable progreFS had been made in reducing tho amount for the benefit of all contributors to the guarantee. (Applause.) A Shareholder asked what tho cost of the now banking hous.o in Cotnhill would be The Chairman said that the cost of the leaso was .£86,000, and the cost of the building would be about .£40,000, but againßt this oxponditurc there would be the rents they would receive from portions that they would let off. The lease was for 74 years. Tho lease of the present premises would end in 1896. Mr. Reid expressed regret that the reßult was not moro satisfactory, and urged the Board to try and economise. The Chairman, in reply, said that tho Company had not of late years had_ tho earnings to maintain such large dividends as formerly. The Board had recommended the distribution, from half-year to half-year, of tho amount actually earned, and had not thought it desirable to provide a reserve fund for tho equalisation of dividends. The low price of their shares in the market was not warranted, and he hoped that the shareholdors were not going to part with them. Ho thought an institution of the strength and position of their own onght to cheerfully 1. ut up with any temporary diminution in its dividend in order to maintain that position. The resolution was then pnt and unanimously carried. The appointment of Mr. Joseph M'Gaw as a director of tho Company, to fili the vacancy caused by tho retirement of Mr. Dalgoty, was proposed by the Chairman, seconded by Mr Arthur Flower, and unanimously carried. The Chairman then moved the re-election of Major Frederick Fannin and Mr. John Sheriff Hill as directors of the Company, which was seconded by Mr. R. J. Ashton and Mr. W. O. Gilohrist respectively, and carried nem con. ■ Mr. Sebag Montefiore then proposed the re-oleotion of the auditors of tho Bank, Messrs. Albert Deacon and Frederick Whinney, which was seconded by General Trevor, and carried. Mr. David Finlayson, at the request of the Chairman, then addressed the meeting. He said: — We have beon in much the same position for some time back, and there cannot be said to be much, if any, improvement yet. It is a trying thing to make brickß without straw. Trade in Australia since the crisis of last year has been in the state of lassitude which inevitably follows a collapse of credit suoh as then took plaoe. Thero has boon an enormous contraction in the volume of trade. Imports in 1893 wore moro than 26 per cent, leaa than in 1891, or .£53,000,000 against .£72,000,000, whilst exports diminished in tho same period about 11 per cent., to .£65,000,000 from .£73,000,000, and, going back to 1888, it is found that from an oxcosa of imports, amounting to .£7,651 ,000 in that year, to an excess of exports in 1893 of .£11,812,000, we have the marvellous difference in favour of the past year of .£19,463,000. A revolution like this cannot take place without a great disturbance, which must be felt by all tradors including banks. Tho falling-off in imports is due, of course, to the stoppage of tho oxtonsivo lending to Australia, to Governments, public bodies, companies and individuals, which was done so liberally for many years. The proceeds of these londings camo out in merchandise to tho extent of many millions annually and provided much of the moro activo and profitable kind of banking business, such as the discount of trade bills and exchange transactions, and, of course, this class of business has for the time being largely diminished. The fall in prices of colonial produce has been a very Borions difficulty and has greatly aggravated the effect of the financial crisis ; in fact, it is open to question whether, had prices not fallen so seriously, the colonies would not have surmounted the effect of the inflation due to tho generosity — the thoughtless and fatal generosity much of it— of lenders in this country j not, of course, without a good deal of individual loss and Buffering, but without any breakdown of credit such as took place. The ac ual volume of exports has been well maintained. With regard to the future, there is much io be done, bnt this you can rely on, that tho difficulty will be faced by the Australian people with energy and determination. During the inflated period muoh labour and capital were, no doubt, misdirected and misapplied ; building operations and other works much in advance of their time were undertaken from whioh thero is no present return, and probably there was a double waste, as under other conditions much of this capital and energy would have been direoted to increasing production. This state of things has now come to an end, and we have now to look to the natural productions of the country for its future prosperity; bnt you cannot revolutionise the industry of a country in a day or a year, and expect men who have been engaged, say, in building operations to change their occupation, their residence, their mode of life, and become effective producers without a long and hard apprenticeship. This many have had to undergo, and tho process ia to be seen now going on amidst much hardship and suffering, but with equal courage, endurance, and adaptability to new and altogether strange experiences. It was natural that people in Australia were stunned and dazed by the magnitude of the calamity that culminated last year, but in the midst of it they were working hard and seeking for fresh articles of export, and also striving by cheapening production and frugal living to meet tho fall in prices of their staple exports, whioh have been to them such an immense souroe of wealth in the paßt. Their exertions, especially in the direction of finding now exports, have already met with considerable success, and more, I am convinced, will follow. It will take time to build up trade and credit under the new and severe conditions now prevailing, but if it ia possible to be done, as I believe it is,, you have a people ongaged in doing it endowed with as much British independence and honesty of purpose as ia to be found anywhere, with faith in themselves and in their country, and there, I think, you have tho necessary elements that deserve success, and I believe will command it. (Hear, hear.) Something has been said about reduoing expenses, and I believe I can answer for the colonial staff in saying they will loyally acquiesce in whatever measures to this end the Board may consider called for by the conditions now ruling. (Applause.) Mr. Mewburn, the manager, then road thn dividend advertisement, which stated that the warrants would be posted on Ist August. Votes of thanks having been accorded to the chairman and direotors and to the officers and staff in London and the colony, as well as to Sir Robert G. W. Herbert, for presiding, the meeting separated.