THE NATIONAL BANK OF NEW. ZEALAND (LIMITED).

New Zealand Herald, Volume XXII, Issue 7415, 25 August 1885, Page 6

THE NATIONAL BANK OF NEW. ZEALAND (LIMITED).

Tn« thirteenth ordinary general meeting of this company was held on Tuesday at the Canncn-street Hotel, Mr. E. Brodie Hoare (of Messrs. Barnetfc, Hoars, and Bosanquet's Bank (Limited) in the Chair. The Chairman, after referring to the retirement of Mr. Magniao from the chairmanship of the Board owing to bad health, said : Gentlemen, I have the comparative statement before me, but the fluctuations in the ordinary business are so small and of such minor importance, I think I need hardly take up your time by going through them. The only real important change, one which, no doubt, you have all noticed, is very much in favour of the bank's financial position, namely, that we show here a holding of £198,000 in consols, colonial Government, municipal, and other securities. These are held on this side. The other items really show very small changes, changes that are of such small importance, none of them exceeding £20,000, that I think I need hardly go through them. The profit and loss aecount is one that must be dealt with separately. While I am upon the subjeot of these figures, 1 think it is only right that I should oall especial attention to the very strong position that the bank holds in the way of having its resources well in hand £369,000 in ooin, bullion, and cash at bankers, and £198,000 invested in these undoubtedly good securities (although at 31st Maroh, owing to ciroumstances entirely beyond our control, consols were not at their present value, or at the value at which we had bought them) show these figures, £567,000, on whioh, either in colony or in this country, we can lay our hands at any moment, and the position is not now materially changed. It is a position any bank may confidently trade upon, and that may give confidence to our depositors and confidence to our shareholders that there is not the slightest neoessity for any oall being made, and it shows that the bank baa ample funds to meet every' possible or probable liability. (Cheers.) 1 may also add that through the kindness of our bankers our inspeotor in New Zealand is armed with a very large credit, of which he oonld avail himself at any time ; in oase of any distrust in the bank he oould draw on a bank, whioh, if I were to name it, I hope you would say it was not the least strong in London. And not only that, bat our oredit all round is such that we need have no fear of any temporary pressure even inoonvenienoing us. We have, however, since the issuing of the report, do sign of even temporary pressure. I am sure it will be gratifying to the shareholders to feel that their credit, and the Board's credit, is such that of the deposits falling due since the issuing of the report, the greater part have been renewed for periods of years. (Cheers,) The depositors are perfeotly right in doing so with our large uncalled capital, and, on the figures before them, they run no more risk than if their money was in the Bank of England. Now, gentlemen, you will like to know what it is that has brought about the payment of no dividend, and these words in the report whioh, no doubt, have caused yon a good deal of alarm. (Hear, hear.) You may remember that at the last meeting, partly in reply to questions, and partly, also, in my own speech, I told you that there were certain accounts which caused the Board anxiety; that we had written off all ascertained bad debts ; but that there were aocounts whioh oaused the Board anxiety, which might, and probably would, result in a loss, though it was impossible to say when or in how many years. I have the accurate words before me. but I have given yon, in short, the sense of what I said on that occasion. Those accounts have been—some of them working —in the bank's books for a considerable period secured ; but the Board have been more and more impressed, as time has gone on, with a sense that those securities were inadequate, and that it was neoessary to make provision against probable losses. Last year I informed you that we had made a private provision in the bank's books against probable losses, which provision 1 did not give you the aooount of, That amount 1 now wish to tell you was rather over £18 000. When we made up the bank's figures at the end of the year to the 31st hUroh, we had a net profit in hand, according to our showing, ~ of £18,000, besides making £36,000 (I am leaving out the odd figures). We had also in hand the miserable £10,000 whioh has stood at the oredit of reserve fund for so many years, making a total of £46,000, bat from that had to be deducted sundry items, amongst others a large provision of £7000 for the depreciation in our consols and other securities. These had to be valued at the date of 31st Maroh, and they showed a loss at that date of £7000, a loss which is written off in our bank accounts. Since then, the consols having recovered, a considerable part of the loss has been recouped—not entirely. We had also written to the inspector and told him that we wished to know his full and candid opinion in the form of a somewhat amended return on all these accounts on whioh we had had doubt thrown. He sent us back a document, and without giving you the details I will give you the rough figures. He told us that the amount at stake on these accounts open was £131,000; that he estimated the losses at £94,000, and he recommended us to write off £90,000. Now, this was a somewhat startling recommendation, and one whioh did not oommend itself to the direotors without careful inspection on their own part. They caused, therefore, this account of the inspectors to be divided under three heads :— Debts absolutely bad; debts on whioh the inspeotor expected a loss; and those on which a loss was probable, but so doubtful that he did not estimate it at any amount. The amount that he estimated to be totally and irrecoverably lost, without any hope of reoovery and with no securities against it, was £20,733, and having £18,000 in hand and £18,000 to profit, we had ample funds in hand to meet it, and we wrote it off. It was the only course ; we have always pursued it, and we pursued it on this oocasion. That would leave us with an estimated deficiency if the securities were realised at the present time, which is a period of considerable depression not only in England, but in the colony, of £70 000, against whioh we should have had the reserve and and the balance of the profit and loss acoount. Well, this is manifestly inadequate, and on looking through oar books we oame to the conclusion that in putting the total at £131,000, which was the total gross amount of the inspector's estimate of doubtful debts, that it was quite within the bounds of possibility he might have understated it. There were aooounts of whioh he has better means of judging than we have, but whioh oertainly oaused me, as a banker of some little experience, anxiety. We thought that, having a defioienoy which our funds in hand would manifestly not meet, that it was better to make one bold stroke of the matter, tell you the whole story with all the figures, and ask you to enable us to make a full and sufficient provision to meet every possible oontingeney, so that when that is done your directors and the shareholders and the public would be able with an honest face to say to every man, " We have a perfeotly-clean balance-sheet; we have not a loan in our books whioh we do not honestly believe to be perfeotly and undoubtedly good." Now, that is the position we want to put this bank in, and it cannot be done without undergoing a somewhat disagreeable process, whioh I purpose to tell you of, though not to ask your sanotion to, to-day. It was suggested in this room by a gentleman, whom I am glad to see here to day, that we should appoint some direotors in the colony. We have done so, subject to your confirmation, which is necessary. Those two gentlemen are well known and highly respeoted by every oolonial gentleman in this room. They are Mr, Edward Pearce, of Wellington, and Mr. James Kattray, of Dunedin, who are both of them well known as men of sound judgment, careful and prudent men of a high position, of good means and of great experience in New Zealand; and I think we ooold not do better than have them as our ooadjators in the colony. As to our inspeotor, we still retain him ; we think that he is the right man to retain. Mr. Dymook is thoroughly loyal to the bank. Mr. Dymook thoroughly knows and understands fully from personal intercourse the wishes and feelings of the board, and Mr, Dymook has so successfully worked the business during the past year that only one new bad debt of any moment at all has been made during the whole twelve months. We are perfectly determined, as we all along have been, and we think now we have seoured, - as far as human foresight can secure, that our instructions will be obeyed; that in future all risky business is to be avoided; that they are not to lend upon mortgages except as a last resource to cover

otherwise secured debts. But you must remember that landed estates, in a place like New Zealand, must in many oases be the ultimate security for a loan, and, failing the repayment of a loan from a source from which it is expected, it is wiser to take a charge over the land than nothing, and in several cases landed property has come into the bank's hands, and is held by the bank, - awaiting realisation, as time and opportunity offer. No opportunity would be lost of realising the securities, but it is not' in the interest of the bank, in our own opinion, to force the sale. It is much better that we, who can afford to hold, should hold until we can get what those on the spot inform us is a fair and reasonable offer, but our instructions to the inspector and staff are, that no reasonable offer is to be refused. lam sure from what passed in this roomthe applause that greeted a remark of mine a few minutes ago —that the meeting is entirely with me and the Boatd when I say it is our wish, and so far as we as a Board oan carry out the polioy, it is our intention to make one sweep—out off this bad limb onoe and for all, and leave the body a sound, dividend-paying, wholesome oonoern. (Loud cheers.) We have perfeotly determined that we would face everything. We largely increased the inspector's estimates, that we might be perfeotly safe, and the proposal I am now going to make to you will, to the best of ray knowledge and belief, leave the bank a perfectly sound, wholesome, going concern, without a single debt on its books we need have any anxiety about, though debts, of course, may arise, and in the ordinary course of banking will arise, but as at present advised, every debt remaining would be either fully provided for or safe. Now there were, I think, four courses open to us when we beoame fully alive to this state of affairs in the colony. The first was to pay you a dividend and say nothing about it. That would not do. You would have found it out, and we should not have deserved your confidence if we had done so. The second was to pay no dividend, and tell you that we had written off all ascertained Dad debts, aud have made light of all these con tingencies. That was a course whioh we were satisfied was not right to you, and was the very worst possible course we could have taken for the bank. The third course was to see whether any amalgamation or anything of the kind could be effected with any other strong oolonial institution in London, which could and would, in consideration of the good profit which we show, take over these things, or a considerable number of them, for the goodwill of the buMne«s. The goodwill of a business of £30 000 is worth not muoh less than £100,000, and it passed through the mind of the Board; and more than that, I was delegated by the Board to consult with our solicitor (Mr. Williams, of Messrs. Freshtield's) how far that was feasible. At present no feasible scheme of that kind presents itself, and the Board are not satisfied that, even if it presented itself, it would be the soheme which it would be advantageous to propose, although we should be perfectly willing to consider, and even to initiate, anything where we saw a reasonable and favourable chance of carrying the matter successfully through. But that is not, to use a familiar phrase, within the immediate range of practical politics ; and I think you will all agree with me that if we can put the bank into the position I have forecast to you, we are in a much better position to deal and get back our money then, than we should be now when our circumstances put us, to a certain extent, in bad odour. The fourth proposition was this—whioh finally commended itself most to the Board, vis., to boldly say, "We will ask our shareholders to allow us to take £100,000 from capital aooount and transfer ib to a contingent bad debt account" The money is lost, or probably lost; it is merely a question at what acoount it shall stand. If it stands to capital aooount the Board- oannot deal with it; if you oonsent to this being transferred to a contingent bad debt aocouut, that contingent bad debt aocount would stand at £118,000, which we believe to be ample for every possible and probable emergency. There would bo no reason then why thoroughly good dividends should not be paid on the reduced capital of £250 000. We should have to transfer the paltry £10,000 from the reserve fund also to that contingent bad debt acoount, and we should start with a clean sheet, and hope to pay you a moderate dividend, and carry something to reserve fond. (" Hear, hear.") This is the proposal, but it will not be made to-day, for by law that must be the business of a special meeting. We wish to have the sanction of this meeting to our suggestion, no less than which would put thfe bank perfectly above the possibility of suspicion. Mr. Dudley Robert Smith, Deputy Chairman, seconded the motion for the adoption of the report and accounts. Mr. Kabslaxk, Q C., who mentioned he was a holder of 1200 shares in the company, said he was sure they were all most grateful to the Chairman for his luoid and very able statement, and they must all be gratified at the course which had been taken by the directors in explaining to the shareholders everything without the slightest reserve or conoealment. Mr. Graham said that at the last meeting he suggested that one or two directors should be appointed in the colony, and he was pleased to see they bad selected two gentlemen, whom, he thought, would attend to the interests of the company. Mr. Vandebbyl, speaking from a large connection with colonial trade, was able to verify the statement of the Chairman that there had been great difficulties to contend with. There had also been a great falling off in the value of many landed properties, which had created difficulties. The resolution for the adoption of the report and accounts was then put and carried without a dissentient.