BANK OF NEW ZEALAND

Hawera Star, Volume XLVI, 3 December 1926, Page 6

BANK OF NEW ZEALAND

... HALF=YEARLY MEETING. AMORTIZATION SCHEME ADVANCES TO FARMERS. SPECIAL TO THE STAR. WELLINGTON, Doc. 3. The half-yearly of shareholders of the Bank of New Zealand was held to-day, the chairman of directors (Sir George Elliot) presiding. In the course of his address, he stated: “I have pleasure in stating that the profits earned for the halfyear ended September last warrant the payment of dividends similar to those paid for the corresponding period last year. “The proposal discussed at our annual meeting of setting up a special department for the making of longdated loans on an amortisation basis was considered by Parliament last session. and an Act known as the Bank of New Zealand Act. 1926, was -passed giving the Bank authority to enter into this class of business. “The directors were authorised to issue £1.406.250 in £1 shares, together with three times that amount by way of debentures. As a beginning, half of this number of shares are now being offered to shareholders, and applications for ..their individual quotas are receivable up to December 31 next. The other half will be issued later if, and when, the demand for loans of this descriptions warrants it. Debentures will be issued as funds are required for the development- of the business. “The Special Parliamentary Committee set up to consider the Bill was averse to the reduction of taxation in the form that we desired. In view of the fact that no direct profit could be made by the Bank on this phase of its activities, the committee recommended that the shares for which the Government had the right to apply should carry a fixed dividend of 6 per cent as against the fixed dividend of 7), per cent on shares allotted to the ordinary shareholders. As this reduction of 1£ per cent on one-third of the capital, together with the business of the department being taxed on the same basis as an ordinary joint stock comnanv equalled the special rebate in income tax asked for. an n<xroement on thesa lines was arrived at.

“Power was taken in the Act that, with the permission of the Minister of Finance, further issues of shares and debentures beyond those immediately authorised could he made on the same lines, hut no application can be made to the Minister unless the consent of the ordinary shareholders of the Bank is first obtained. In the future, therefore, the matter of extending the operations of this new department will he made on the initiation of oldina.rv shareholders.

“As the making of long-dated loans on an amortisation basis by a joint stock bank is, to an extent, experimental, the ordinary shareholders, should they deem it advisable, have the light to wind up the long-term mortgage department, _ cancel the shares and return all capital at par. “It is expected that the expense involved in connection with the activities of this new department will not be great, as all matters connected with it will be carried on by the staff already in existence at the various branches, and although no direct profit can be expected, it is anticipated that a certain amount of indirect advantage may accrue to the Bank.

“The department will bo watertight, trading on its own special resources, and no funds of the Bank will be used in its conduct otherwise than that advances up to £500,000 from the ordinary funds may be made pending the

"aising of capital or debentures. With this exception, it is intended that the irdinary business of the Bank and that of the long-dated loans shall be kept entirely separate.

“This is believed to be the first instance of an ordinary joint stock bank pi nnv part of the world creating a special department for this class of '•usiness. and the experiment _ will, doubtless, he watched with keen internet bv bankers generally, and especi'lh* by bankers in countries that soe"ialise in primary production. The lirectors are convinced of the soundness of the scheme and of the benefits 'mpwvers will derive from it.”