THE BUSINESS OF THE LOAN AND MERCANTILE AGENCY CO.

New Zealand Herald, Volume XXV, Issue 9016, 31 March 1888, Page 6

THE BUSINESS OF THE LOAN AND MERCANTILE AGENCY CO.

We have already given an outline of the speech of the Hon. A. J. Mundella, M.P., ut the annual general meeting of the New Zealand Loan and Mercantile Agency Company on February 3. The extended report which has now been received shows that Mr. Mundella entered at length into many interesting particulars respecting the trade of these colonies and the position of the company. We give the following portion of the speech : — Our business combines two branches. One is the loan business— lent on mortgage as they figure in our balance-sheet, and the other is the mercantile agency business, which is practically commissions obtained by the sale of the produce of the land. Now the extent of the loan business is determined by the amount of our subscribed capital, and our debentures, which is used mainly in loans on mortgage of real estate. But the mercantile business practically, we may say, has no limit, except our own capacity. It has a steady annual growth. Now, we began 23 years ago with debentures at 5, 6, and 7 per cent, for our loan purposes. We paid off the 7 per cent.'3 and came down to 6, and then we paid otf the 6 and came down to 5 and 4£, and now those who require 5 per cent, must go elsewhere ; and I am glad to say that we have been paying otf these 5 per cent, debentures as they became due without having recourse to our bankers or any extraneous assistance whatever. It may also lie Interesting for you to know the position of our ■wool commission business and its growth. In 1882 our consignments of wool to this country were 72,088 bales. In 1886 they reached 84,993 bales, and in 1887 they were 90,291 bales. We likewise sold in Australia and New Zealand during 1886 66,441 bales, and in 1887 72,108 bales. The frozen meat trade between New Zealand and this country, in the consignments of whicjh this company largely participates, likewise continues to show considerable expansion. The imports of mutton and lamb in carcases from trio colony were: In 1882, 8839 carcases; 1883, 120,85*3; 18S4, 412,3-19; 1885, 492,269; 1886, 655,888; and in 1887, 766,417. New Zealand, though it has been increasing its exports, has been diminishing its imports. In the year ending 30th September, 1886, the value of the imports was £6,982,000, and in the year ending September, 1887, they were £6,225,000, so that the imports were diminished bv £757,000, evidently from a restriction and increased care and economy as to the amount of their indebtedness ; but the exports increased in the same period from £6,572,000 to £7,044,000, an increase of £472,000. Now, with regard to this mercantile business, I can only say it is the most profitable department of our business. The expense of conducting it is not increasing except proportionally. It will be .obvious to you as men of business that the establishment does not increase the expense of management, and that the expense increases only in proportion to the increase of business, and therefore, though we can put a limit, and ought to put a limit, to our loans on mortgage, we cannot so reasonably put a limit, a nd ought not to put a limit, on our mercantile business. We can conduct that business at present neither so efficiently nor so economically as we ought, because it absorbs more and more capital every year. The balance-sheet for 1886 shows that the advances on wool and produce on hand and to arrive were £874,25/, but in 1887 they amounted to £1,026,720, an increase, you see, of more than £150,000 in that year in the mercantile part of our business, and that part of our business that we want further to develop. You see that the million employed is more than our own capital and reserve fund, and you ought not to conduct a mercantile business on debentures. It ought to be conducted on the capital of the company, and while we are against an increase of our capital for the purpose of making loans, we ought to have a capital without liability bearing a moderate rate of interest which should provide the means of conducting this large mercantile business. It ought to be a capital specially provided for that purpose, because if we use colonial capital we have to pay colonial rates of interest. The mercantile business ought to be conducted on the capital of the company. 1 am only stating this to foreshadow tvh&t is in our minds. I do not know what

form exactly it may take. We may resolve on- doing what other companies have done, some of them, and that is to put out a limited number of shares, one in ten or something of that kind, fully paid-up and bearing » certain rate of interest, not ranking part passu with the ordinary shares. The capital would be our own, and Ave should be entirely independent of outside credit of any description whatever. I do not know that I have anything more to bring to your notice. I have entered into great detail, perhaps more than I ought. (No, no.) I have endeavoured to show you exactly what the state of our business is, and what are our prospects. I do not know that there is any comnany which is doing similar business that is doing it better. The data which I have now presented to you gives evidence of an expansion in our mercantile business, and in order to keep pace with its further profitable development it may _ shortly be found desirable to make an addition to the working capital of the company. The precise form •which such increase may take lias not yet been considered, but it may bo found expedient to make a further issue of shares, calling up as has been done by other companies a certain amount per share which will carry dividend, and allowing a fixed rate of interest on the balance of capital paid in advance. As previous issues of this company nave £- IDs per share called up on which dividend is paid, the same principle would be applied to the proposed further issue, leaving £22 10s per share, representing the capital to be paid in advance upon which a fixed rate of interest would be paid. __