The Star. TUESDAY, JUNE 27, 1905. TUB "BANK OF NEW ZEALAND.

Hawera & Normanby Star, Volume XLVIII, Issue 8933, 27 June 1905, Page 2

The Star.

TUESDAY, JUNE 27, 1905. TUB "BANK OF NEW ZEALAND.

Deliterod otery evening by 6 o'clock 111 H&wera Manftia, Normtnby, Okai&wa. £ltb»m, MangatoW, K»pong», Awatoma, Opunake, Olakoho, Miuiatob< Alton, HarloyrlUe, Pates, and WaTerlev

There arxj many colonists who look upon • tho ]3ank of New Zealand as their own peculiar monetary institution, and who, ( whilst having no aspirations towards the ; evolution of a purify State bank, regard it with an eye cfi proprietorship, as some- i thing which owes its present existence and prosperity to the assistance given by the people with ready hand in time of stress. And these with others will be truly pleased with tho late report and balance-sheet presented at the annual meeting, and will look upon the immense recovery made in the fortunes of the bank as a reflection of the colony's prosperity. And absolving tho ordinary shareholders from all blame for tho old days of bad administration, of which the globo assets are monuments, it is pleasing to see recorded that from the funds of the bank since 1895 the directors havo transferred more than £1,000,000 to tl\o Assets Realisation Board, and in tho circumstances, after long deprivation of interest on invested capital, few will grudge those shareholders the modest dividend meted out to them. Besides the million mentioned, it sum approacliing £400,000 has been employed in writing down properties and reducing liabilities of many kinds. It will be remembered that our Parliament infubcd vitality into a moribund institution by passing legislation assisting the- bank in 1894 with two million sterling. Of that sum one million was paid off last year, and the remaining million is held by the colony in preference shares. Until the liability to the Assets Board is finally extinguished the dividend of ordinary shareholders is limited to live per cent, and but £150,000 remains to be paid off. This desirable consummation, it is expected, will be reached this year. If thai bo so the bank will, witn respect to its ordinary shareholders, enter into a new phase. The difference between the ordinary and preference shares is thus explained by the Canterbury Times : "Until the liability to the Assets Board is extinguished the dividend of the ordinary shares is limited to 5 per cent., but when the bank is freed from this incubus they will be able to receive whatever the business may justify. In this respect their shares may stand on a very different footting from the preference shares held by tho State. The preference shares rank in priority to the ordinary shares to the extent of 5 per cent., but after that they are at a distinct disadvantage. They participate in dividends over 5 per cent, at only half the rale allowed to ordinary shares, and in dividends of over 10 per cent, they do not participate at all. If tho dividend on ordinary shares were 8 per cent., for instance, the dividend on preference shares would be 6£ per cent:, and even if the dividend on ordinary shares were 30 or 40 per cent, tho dividend on preference sliares could not exceed the limit of 10 per cent. This point is of importance iv view of the fact that the directors will now have to deal with the profits independently of any statutory obligation, and it shows how' very far we still are from, tho realisation of the socialistic, ideal of a Slate bank. On this year's figures the directors, whilst paying the maximum dividend of 10 per cent, to the preference shares, would be able to pay 35 or 40 per cent, to the ordinary shares, and still make a substantial addition to the reserve fund." If the Slate were a bright and phoning example of lucid bookkeeping, these figures would be an argument, and a strong one, for the State administration of tho affairs of the Bank of New Zealand. But we think that if the bank concentrates its energies in making the, reserve fund so strong that the State will not be called on to again tide it over bad times, tho people will for some time to come be satisfied. And we say this knowing that a reserve fund is sometimes made use of as <i sinking fund in which to hide profits, beating in mind that the people's investment of one million should give that people suflicicnt control to render it able to prevent any such hoodwinking. But there is another side of the question, that of tho ordinary shareholders who have been without dividends for many years in penalty for the sins of old-time directors, and that position was placed before the annual meeting by Mr Martin Kennedy. Speaking as shareholder and director, that gentleman said : "Five per cent, did not represent more than a dividend of 1^ per cent, to the bulk of the shareholders, the cost of whose shares .was more like £20 than £3 6s Bd, for in 1894 the £10 share capital was written off, a call of £3 6s 8d was written oil". ,and a further call of £3 6s 8d was also made, and tliis was the capital on which the 5 per cent, dividend was paid. . . . Whilst holding out a hope to shareholders of a. Lugo -dividend, lie agreed 'with the Chairman regarding the need for building up a strong reserve- fund, and he would go the length of saying that the dividend should not be increased until a reserve fund of £100,000 had been made. Tho bank would be under no obligation to the colojiy when Che million loan had been paid off, and the bank was so prosperous now that >it was earning more than almost any other bank in Australasia. The bank, under these circumstances, should certainly pay a dividend at least equal to those of other banks." With tho last observation we agree, but would go further than Mr Kennedy with' respect to what constitutes a desirable reservo fund. The bank's moral responsibility to the colony does not end with its- pecuniary obligations. It behoves the bank to assure the colony that the state of affairs in 1894 will not recur; and £100,000 does not appear to supply that security, ' considering the amount of money dealt with by the-institu-tion in its enormous business. When it required £2,000,000 .to straighten the, bank in the past, qn what : basis is it' imagined 'that in bad times £100,000 will keep, it from seeking such, help in the 1 future? And the matter for consideration now is, whether dividends should be increased before a perfectly -is&titfactbfy reserve fund has been established. '