BANK OF NEW ZEALAND

Manawatu Standard, Volume XLV, Issue 168, 19 June 1925, Page 2

BANK OF NEW ZEALAND

ANNUAL MEETING OF PROPRIETORS. ADDRESS BY THE CHAIRMAN. Tho annual meeting of proprietors of tho Bank of New Zealand was held to-day at Wellington, Sir George Elliot presiding. In addressing those present ths> chairman said : The issue of the new capital, viz., 375,000 preference “B” shares and 750,000 ordinary shares of £1 each, which was contemplated last year, has been successfully carried through. The amount, £554,465, appearing under the heading ot “New Share Account” in tho balancer shect, represents tho purchase money of new shares applied for up to 31st March last. The application list did not close uniil Ist April, and allotment could not be made until a certain time had elapsed. Unfortunately, n small number of shareholders neglected either to take up the shares to which they were entitled, or to dispose of their “rights” before the Ist of April, and, as the directors were afraid there might have been soino misunderstanding in the matter, they decided to extend until the 30th of June the period in which the option to purchase or dispose of tho new' shares might, bo exercised. So far, 743,447 ordinary shares have been applied for. Shares not applied for by 3Cth Juno, and the fractional shares, will bo offered by tender to holders of ordinary shares on the register on tho 10th of July next. When the new shares aro allotted and the past year's profits are dealt with, capital, reserve fund, and undivided profits will stand thus: Preference capital held by the Government of N.Z £1,875,000 Ordinary share capital 3,750,000 4 per cent, guaranteed stock ... 529.988 Reserve fund 2,575,000 Undivided profits 513.299 A total of £9,243,287 PROFIT AND LOSS ACCOUNT. Tho profit earned from the ordinary operations of the bank for the past year amounts to £319,285. In comparing this profit with that of the previous year, it should bo remembered that the year under review is tho first complete year during which we have had the uso of the £1,125,000 of now capital paid up on Ist October, 1923, and the accretion to the reserve fund of nearly £500,000 made a year ago. Note circulation shows an increase of £96,743. Our deposits at the balance date totalled £30,U79,282, as compared with £30,£01.719 in 1924—‘a decrease of £422,437. Deposits from tho public showed a satisfactory increase, but Government deposits are £1,923,003 less than in tho previous year. Of the increase made by tho public, amounting to £1,500,566, about half is on fixed deposit and tho other half is in current account balances. This increase may bo regarded as satisfactory. It reflects to some degree the prosperity experienced by our farmer customers during the past year. The increase of £349.490 in bills payable and other liabilities is an ordinary fluctuation.

Coin, cash balances, and deposits with bankers show a .small reduction of £140,028 on the previous year’s figures. Money at call and short notice, Government securities, and other securities in London aro also less by £50,009. Bills receivable in London and in transit are less by £344,349. New Zealand Government securties show an increase of £887,477. The £1,125,000 received from the sale of the new shares issued to shareholders during the year, was lent to tho Government against inscribed stock, bearing interest at 5? per cent, with a currency of 10 years. This transaction and the maturing of certain other Government securities account for this fluctuation. . .

Australian Government securities at £1,239,696 are less by £545,138, owing partly to the maturing of a portion of our holding, and partly to tho sale of sorno of our securities in order to ease the difficult exchange position that prevailed in Australia during the year under review. Municipal securities show a small increase of £55,385. ADVANCES.

Advances amount to £19,329,133, as compared with £13,781,100 at 31st March, 1924. It might, perhaps, have been expected that the causes which brought about

the increase in our deposits would have led to a shrinkage in our advances, but this has not been the case. While many old advances liavo been paid off or materially reduced, fresh advances niado during the year bring the total up to a slightly higher level than it stood at a year ago. It will be noted, however, that deposits exceed advances by a larger amount now than they did 12 months ago. The movement in deposits (other than Government deposits) and advances of the six banks that do business in New Zealand, aro disclosed by tho Government quarterly - returns for tho past five years, which are as follows: Excess of Excess of Mar. Deposits Advances Advances Deposits £ £ £ £ 1921 47,155.000 52,446.000 5,291.000 1922 40,360,000 46,491,000 6,131,000 1923 43,465.000 42.521.000 944,000 1924 47,033,000 44,403,000 2,630,000 1925 49,897,000 43,730,000 _ 6,167,000 There is an increase of £84,365 in landed property, premises, etc., caused by the erection of new buildings and by necessary alterations and additions mado during the year. EXCHANGE AND CURRENCY. In tho world of business and finance two features at least are outstanding since out last annual meeting. The first is the adoption by the Allied Governments of the Dawes report, which re\Tewed the financial position, and proposed readjustments with a view to restoring the economic system of Germany, giving her assistance in the shape of a loan, and enabling her to set up a reliable unit of value in place of the paper mark, tho value of which, as far as exchange was concerned, had completely disappeared. I do not propose to discuss tho provisions of this valuable report, which will, in future years, rank as an important historical document, but I may safely say that it has already done much towards re-starting in Western Europe the clogged' wheels of industry and commerce. The Other great event to which I refer has taken place since the close of our financial year. On 28lh April Mr Winston Churchill, Chancellor of the Exchequer, announced in his Budget speech in the House of Commons that, from that date, * Britain had returned, in her international dealing, to the gold standard from which war-time conditions had driven her nearly eleven years ago. South Africa had some time before resumed making gold payments, and some large shipments of gj'd had been received in Australia from that source. When tho Chancellor made his announcement regarding Britain’s new policy, ho was also able to state that Australia and the other Dominions were simultaneously taking the same course of action. This was confirmed next day in regard to Australia, and in Now Zealand it has been announced that, although no change in the legislation placing restrictions upon the shipment of gold coin is contemplated, the policy of the Government is to permit, under license, tho free export of gold. The immediate result of this change of monetary policy was that the rates of exchange between New Zealand and Australia, and New Zealand and Groat Britain, were, within a few days, subjected to the greatest chango that had been experienced for many years, tho rate for buying bills on London on demand falling from 55s per cent, to 30s per cent., and for selling demand drafts on Australia from 50s per cent, to 7s 6d per cent. Rates for other usances, either buying or selling, are in accordance with the foregoing. and all rates are less expensive to the customer than the cost of importing or exporting gold. Reference lias frequently been made from this chair, during the past few years, to tho difficulties that post-war conditions have created in the transference of funds from place to place —the extreme fluctuations that have taken place in many conn tries, and the tremendous divergence from tho “par of exchange” that some currencies have experienced. In New Zealand, however, we have not experienced the very rapid fluctuations that have taken place in some countries; still, circumstances have brought about a divergence which created an unusual tax upon the exporter of New Zealand produce, and it must be satisfactory to those who are interested in our export trade, that the buying rate of exchange has now changed so greatly in their favour. It is quito true that the importer has lost an advantage that he has for some years been accustomed to receive, but this was unavoidable, and I am sure you'will all agree that the improved position in connection with exchange is a matter of great satisfaction.

While gold must always be considered a great faster in stabilising exchange, other factors will at times have their effects. Variations in quantities and prices of imports ar d exports, rates of interest, new loans, or the payment of old ones, will all affect rt tes of exchange. As most of you are aware, the reversion to tho gold standard in Britain does not carry with it tho immediate return to a gold currency’, nor, at the present time, would such a change bo either safe or advisable. In addition to bank notes, all safely secured, and silver and copper coin, there were as British currency, outstanding on Ist April of this year, £288.635.000 in Government currency notes, legally secured by:— Gold coin and bullion 27.000,000 Silver coin 7,000,00 Bank of England notes ... 26,950,000 Balance in Bank of England 133,000 Government securities 239,913,000 £300,996,000 The highest amount of Government, currency n >tes outstanding al any recorded time yeas £368,231,000 in December, 1920; so that they were reduced" by £79,596,000 before 2nd April, 1925, and it is to be eoufidemly expected that, the work of reduction will go steadily on; but it, is clear that, until the currency notes are much further decreased, it would be unwise to resume the free circulation of gold coi i. for such a course might lead to a depletion of gold in Great, Britain sufficient ta injure the national credit.

The circulation of notes in New Zealand ins ;ead of. gold can be no pecuniary loss to anyone, saves wastage of metal, yields an important amount in tax to the State, aid enables the banks to afford more accommodation to their customers than they would have been able to do if, in addition to what, is legally necessary to hold, th jy were called upon to deplete their ressrves in order to provide sufficient gold foi circulation. The proportion of gold the t must be held against notes in circulate n in New Zealand is one-third; as a matter of fact, the gold and bullion held in he banks in the Dominion at. 31st March amounted to £7,727,904, and the notes outstanding amounted to £6,694,044. Mr V itliain Watson, in seconding the motion far the adoption of the report and balance-sheet said: “In his excellent speech th? tliaii man has touched upon —somewhat lightly, 1 think— the financial resources of the Eominion in connection with its expenditure. When, as pointed out by him, the value of the exports only exceeds that of the imports by a much less amount, than that req lired to meet the interest payable outside the Dominion, it is surely time for sensible ar.d honest persons to pause and consider. Much has been said about, the cost of living, and some people will glibly remark that it is the same all over the world, lut I am not so sure about that, and, in any case, I am dealing witli New Zealand only. In addition to the materials produced, manufactured and used in this Dominio i, it. must be acknowledged that £49,800,030 is much too high an amount to pay- :or imports during one year, and there eu i bo no doubt that a very large proportion of these imports consists of luxuries, and this, to a considerable extent, from foreign countries which, in tho eircinnsb.nces, are not only unnecessary, lint positively harmful to the future welfare of the gauntry. Possibly bankers, as well as merchants and others, reap temporary benefits from the present swollen trade, but it is surely at the expense, of the community if its income does not meet its expenditure. Further, if the high rate of living be allowed to progress, and wages be raised in accordance with it, the production >f our exports will become so expensive is to prevent our competing with other countries.

“In i\ arch of this year tho chairman and I paid a visit to most of the branches of the bank in the South Island, where we found affairs generally in an excellent condition. We found that the past bountiful season had had a. most beneficial effect and, speaking generally, our advances gave little anxiety, while money on deposit has increased materially. We were also much impressed with tho manner in which farming operations wore being carried on. Land values were warranted bv average returns, and speculation seemed to be I are. Tho chairmar did not mention our new note issue. I am glad to say that wc have now received a considerable su] ply of the forms, and wil be übje to provide tho public more lib 21-ally with new notes than heretofore.”