BANK OF NEW ZEALAND

New Zealand Herald, Volume XXXII, Issue 9919, 7 September 1895, Page 5

BANK OF NEW ZEALAND

THE ADJOURNED MEETING. REPORT AND BALANCE-SHEET ADOPTED. •'•;.'. t-: ■■■;;;; VOTES OF THANKS TO PARLIAMENT AND DIRECTORS. V A FAVOURABLE OUTLOOK:. [HI TKLBQSAPH.—PKESS ASSOCIATION. J Wellington, Friday. The adjourned annual meeting of the Bank of New Zealand was held in the Chamber of Commerce this afternoon. Mr. Watson president of the Bank, was in the chair, and , about 30 shareholders were present. The President said: You hare had the. balance-sheet of the Bank in your hands for the past week, and are doubtless aware of the full particulars of the Bank of New.' . Zealand and the Banking Act of 1893, which has just become law. Into the figures of the .-.. balance-sheet I need hardly enter, beyond saying that it is proposed now, in addition to ! the entries, required by the Act, to write off the reserve fund £45,000, and balance of - ' profit and loss account £383, so as to reduce the iiem "bad and doubtful debts to £376,900, the amount to be written off as provided by the Act As many shareholder* may not have seen the Act itself, or, although seeing it, may not be able to apply its provisions to the circumstances of the Bank bo as to form a correct conclusion, 1 take this on-, portunity of placing on record the provision* * '■}■ of the Act, and the exact position in which it will leave the Bank. In the first place, then, the paid up capital of £900,000 and the .; proceeds of the call of £3 6s 8d per share, payable this year, are written off. To replace these by way of capital the Government are to subscribe for £.500,000, preferential shares ~;, bearing interest at the low rate of 3J pec cent. These shares may be re-purchased by. shareholders at par within the next six years. Shareholders are called upon to pay another £3 6s 8d per share in four halfyearly instalments beginning on the 30th June next year, and ending on the 3lsi December, 1897. This will be the share capital, and it is stipulated that out of the net annual profits of the Bank, after payment of £50,000 to the Assets Board, 5 per cent, interest on these shares will go to shareholders for the present, and in the event of there being no deficiency remaining on account of properties removed from th* Bank, the whole profits of the institution will be payable to shareholders. In any event no further call can be made until after the 31st of December, 1898. The. £1,000,000 invested according to the Bank of New Zealand Share Guarantee Act of 1894. is freed for use in the Bank's ordinary business. The Government appoints one director of the Bank, while the liability on the part, of the colony subsists. The whole of the stations, stock and implements and other landed properties in New Zealand, including the properties of the Auckland' Agricultural Company and the Estates Company's shares in the Thames Valley Land Company are to be sold to a corporate body termed the Assets Realisation Board for the price of £2,731,706, and such additional sum as may be necessary to adjust the accounts after the 31st March. This sum represents book; values of these properties, and this incubus in the assets of the Bank and the Estate* Company will now be replaced by debenture*' of the Assets Board bearing 3£ per cent, interest, and having any deficiency upon them guaranteed by the colony. By this transaction the balance sheet of the Bank of New Zealand Estates Company will be reduced to small figures, and the position of the Company will be rendered thoroughly sound, while the liquidation of the assets and total extinction in a very short time will be feasible. The amount to be written off as bad in the books of the Estates Company will be £467,100, against) which no assets exist, and £296,300 to bring down remaining assets to proper realisable values. The present deficiency in assets to be taken over by the Assets Board is computed at £850,000. With good economical management on the part ot the Assets Realisation Board, and an increase in the Values of wool and other products, of which there is every likelihood, this difficulty will fast be made to disappear, and the capita] and goodwill of the Bank, which will now be very valuable, would be then the free property of shareholders in time. To secure the above deficiency the colony is to have a lien upon the shareholders' capital and uncalled reserve liability The Assets Board is to consist of three persons, two to be appointed by the Government and one by the . directors of the Bank. Power is given to the Bank to purchase the business of any other bank doing business within the colony, but so that only the sound business of such bank shall be taken over, and that the selling bank will have to liquidate its own bad and doubtful debts. It is estimated that by such a purchase the Bank of New Zealand will be enabled to pay shareholders regular dividends of five per cent, per annum, and contribute materially to the reduction of the deficiency of the Assets Realisation Board. The Act further provides that, whilst the liability of the colony exists, shareholders are not to wind up or dissolve the Bank so as to cause a loss to the colony, and the Government, through the President, have power of vetoing such proceedings as might be considered detrimental to the interests of the colony. These are the principal changes brought about by the Act. Their effect will be to separate entirely from the Bank, and free the creditors of the Bank from any risk attending the large mass of properties standing in the books at nearly £3,000,000 of money, which have so weighed down the Bank during the past ten years. Had the directors of the Be.nk known when the Bank of New Zealand Estates Company, Limited, was incorporated, that the prices of wool and other produce would fall so low as they have done they would probably never have incorporated the company at all, but would have taken other measures at that time. Had prices noli fallen it is probable that the deficiency with which we are now dealing would not have been so serious as to warrant the present measures, I would ask those whose first impulse would be to impute . blame to consider what the values of the property were ten years ago, and what they are now, and to remember that shareholders of nearly ' every im-; portant financial institution doinp business principally in the colony have suffered severely, and in many instances have not only had to pay calls, but have completely lost their properties. On the 7th of February ■ last, in this place, I stated to you that it was not contemplated then that any further amount of reserve liability should be called up. At that time we had probed into the affaini of the Bank, but were unable to ascertain fihe position of the Estates Company until the accounts of the head office were received from Loudon in the colony, and until we could strike a balance-sheet for the year ending 31st March last. By the Share ■ /* Guarantee Act of 1894, the directors and / auditor? of the Bank were enjoined to treat the item of £1,850,000 shares in the Estates Company at par value. On ascertaining th« result of the working of the Estates Com* pany for the year endiug the 31st March last, and on becoming aware of the whole actual ' position of the Estates Company and the' v Auckland Agricultural Company, it was apparent that under the system then existing, .-■ the Estates company was unable to pay interest on its indebtedness to the Bank, and if the prices of produce did not rise very considerably, yearly deficiencies would accrue which we should not be justified iu concealing from the shareholders. Had we ' merely come to this meeting with tidings of . deficits the credit of the Bank would be gone, : aud the Bank itself would soon follow it. We did not consider it our duty to throw up our hands in such a way, but we represented the position to the Government, Parliament having already assisted the Bank by a guarantee of £2,000,000, and we asked tor reasonable assistance in the interest both of th« colony and the shareholders. A joint com-; mittee of both Houses was set up to inquire' into the affairs of the Bank. This committee, while being careful not to destroy the confi- ! dence of customers of the Bank by probinginto individual accounts, made a most careful investigation of the general business and affairs of the Estates Company, and asked the directors to put forward their recommendations as to wtiat should be done to rehabilitate the Bank. Thereupon the directors recommended a scheme in most respects similar to that subsequently adopted by the committee iu their re-' : Eort. The most importaut alterations made '.'..'■ y the committee were, that instead ef £1,000.000 preferential shares being subscribed for by the Government, only £500,000 has been subscribed, and that instead of shareholders having issued to them deferred shares (which they would be able to ' deal ;' with) in lieu of capital written off and hypo- i thecating the whole £6 13s 4d against anv deficiency on the estates, the Committee reported that there should be a call of £3 6* 8d per share to be turned into capital, divi- • dends on which up to 5 per cent., after the payment of £50,000 per annum to the Asset*; Realisation Board, should if earned, be paid to shareholders, and that • this capital.' together with the remaining £3 6a Bd, should ■ be secured to the colony for any deficiency > on the assets realisation. Thus, had \ the .. directors' recommendation -. been carried . out no call might have been necessary. We, consider, however, that shareholders should be • grateful •'■' for what the Committee recommended, and for what Parliament has' given effect to. Had tno Banl been allowed.- ' to go into liquidation, shareholders, *»ould' undoubtedly have had promptly to pay the • ■■

whole reserve liability, or as much of it as they individually could. Now there la only one-half of the reserve liability to pay, and spreading the payments over two years commencing nine months hence will be agreeable to those who are not in affluent circumstances, while, both to them and to those who are rich, there is the consolation that on these payments there is every probability of their getting five per cent, interest, besides having, under favourable circumstances, the goodwill of an enhanced business preserved to them. By the act of the Legislature the position of the Bank as regards its creditors is rendered secure and stronger than that of any institution doing business Bouth of the equator, and, the position being now thoroughly ascertained, shareholders may well look forward with confidence and hope. The prospects of the colony, with ■which the Bank is so much bound up are brightening. Wool and other products are advancing in price, and when it is taken into account tha*a penny per lb rise in wool alone will mean £12,000 per annum to the Assets [Realisation Board, it will be seen how important any rise in the price must be. Ine active development of the mining industry which is taking place both at the lhames and Coromandel districts, and on the est Coast of the South Island, cannot fail to enhance the profits of the Bank. The President concluded by moving the adoption of tht report and balance-sheet. The Hon. W. W. Johnston seconded the motion. In answer to Mir. Blanchard Ths Chairman slated that the adoption of the report bound them to writing off the bad debts mentioned in the report. _ The motion was put and carried without discussion. , ... Major Messenger asked what the goodwill of the Bank meant to shareholders, as they did not know what they had to look forward to. When he took shares they were £10 in value, for which he gave over £20, and understood he had to hud £10 and no more. He wanted also to know, as the Bank had been declared in Parliament to be solvent, how it was necessary to call on the reserve liability. He noticed that Mr. Ward, in the morning paper, stated that shareholders would have a reversionary interest in the property. It appeared to him they as shareholders were there simply as a matter of form, as Parliament controlled all The President said the shareholders had active power, as they appointed their directors, but Parliament had the power of ▼eto, which was only right in consideration of the guarantee. Major Messenger explained that he was not antagonistic, but desired information. The President explained that the goodwill was the reversionary interest in the Bank, which would come back to shareholders when the whole deficiency on the Assets Companv was cleared off; and as to the reserve liability, what Major Messenger had said was true before the Act of 1594 was passed, but the Act of 1595 had altered the position. Mr. Blanchard, in giving utterance to his views, said that he thought they were those of other? present. He had placed these views on paper, and in reply to a remark by the President, that he was not talking to a motion, said he would finish by moving a resolution, but if shareholders did not desire to hear him he would sit down. He complained bitterly of the action of the directors in retiring from the position taken up at the last half-yearly meeting as to the Assets Company. When in February a number of shareholders desired an investigation in the Assets Company they were refused one, but they placed the same information at the disposal of the Parliamentary Committee. Ho acknowledged that slight alterations were necessary in the Act of 1394, as the second million was so placed as to have to be invested at a loss. They knew that £750,000 debentures were only redeemed in May, and do one expected that in the last half-year, with the low prices of staple products, the Bank would make a profit for the half-year ending March 31st; yet they placed the affairs before a joint Committee of both Houses, not one of whom was a shareholder in the Bank of New Zealand, while one was president of an opposition bank, and till lately the employer of the president of the Bank"of New Zealand; yet though shareholders had asked for an investigation this was refused, and now an attempt was made to show as darkly as possible the management of previous "directors in order to make their own look brighter. What was the meaning of the sentence in the President's last year's speech that " we are satisfied that when this call is paid no farther call will be necessary V The President pointed out that Mr. Blanchard had omitted to read the whole sentence, which said, " provided we can work on the lines we have laid out for ourselves." Mr. Blanchard did not think it was necessary, and said the position was that they could not trust the present directors any more than their predecessors. He complained that at previous meetings the directors had refused to answer questions or give information, and compared this with their action in granting the information to a Parliamentary committee. A short time ago he had called at the Bank for information as to the land tax payable, and was asked bv the president what he wanted it for ? He was told then he would soon see legislation that would ease his mind. He stated that the total savings of the Bauk would be £96.000, made up mainly as follow :— £15,000 in working expenses, £13,000 in salaries and honorarium, £40,000 in debentures paid off in May, £11,000 by replaceing 5Js per cent, by 4 per cent. Considering these savings, the action of the directors could only be described as contrary to the interests of the shareholders, whom they seemed to look on as so many wells into which they were going to place force-pumps, so that every six months they would get a supply of liquid gold. He called on shareholders to defend their rights while yet thev had time, and not give proxies thoughtlessly. H shareholders would send him their proxies, he would see that their interests were protected, and he dared the directors %> postpone the meeting till after the result of the London meeting was known. Is had been stated by one of the Legislative Councillors that he knew what Mr. Ward had stated in London, but Mr. Andrews was the only man who knew that a huge altar had been set up in regard to this matter, and that the shareholders were to save the colony He asked why should the shareholders do so? It had been said the Government would make a present of two millions, and, lie said, let them keep their word. He stated that on the strength of what the President had said many of the shareholders had pledged their credit, and this call meant ruin to them, and in their name he spoke of this. It had been said that if shareholders did not accept this position it would mean liquidation. It meant nothing of the kind. It was not for him to place an alternative before them, but he believed that one result would be that this Bank would draw down the Government, and it would be a good thing if this body of political experimentalists and plungers were out of office. He concluded by moving, " That this meeting calls upon the directors at present in London, Messrs. Glyn, W. T. Holmes, and another whose name he had forgotten, to resign their position on the Board of this Bank." The President called for a seconder, but there being none he declared the motion lapsed. He explained that directors had either to come to the annual meeting when they knew of the deficiency, or take steps to make the position good, and this was what they had done. He had stated in his speech that in February they had probed into the position of the .Estates Company. If they allowed the Bank to liquidate shareholders would have to pav up their calls at once. . Mr. Blanchard: We would have the colony's two millions. The President had yet to learn the two millions would stand between the colony and the shareholders. It would have been a liability of the shareholders, and would have had to be paid up. Mr. Blanchard had threatened to take the matter to the Supreme Court and obtain an injunction to force the Bank into liquidation. Mr. Blanchard retorted that this was quite true, and it he had had the money he would have carried it through.

Mr. Riley (Dunedin) said he had listened with pain to the tirade of Mr. Blanchard. It was unworthy of him, and would not damage the president or the Bank. He was pleased that his motion was not seconded, and also thankful that Mr. Blanchard's motion last Jrear to set up a committee to investigate was oat, if his speech was any criterion of what the result would have been. He would move, "That this meeting desires to accord a hearty vote of thanks to Parliament, and especially the Government, for the timely assistance rendered to the Bank of New Zealand and the colony at large at a most critical period in their history by the passing of the Banking Act of this week, and also to express its gratitude for the consideration shown to the poorer class oi shareholders in spreading the call over, two years ; further, the meeting cordially acknowledges its deep obligations to the president and directors for the efforts they have made to conserve the interests of the shareholders and to put the Bank on the solid foundation on which it now rests. He thought this resolution would commend itself to shareholders. They must not forget that the position was not due to the action of the Government or the present direc • tors. It was due to thoseof the past.and had been inquired into ten years ago, by Mr. Blanchard and others. He was not owing the Bank of New Zealand a penny, and could say that the directors had done everything they could, to conserve the interests of shareholders, and he ;believed they could look forward hopefully to the future. If the Bank had been allowed to close its doors, it would have caused widei spread ruin and distress, and paralysed trade I and industry. The colony had been on the

mouth of a volcano, and had it not been for the Government, who had shown great Elcck and consideration the colony would ave greatly suffered. If a committee of shareholders had been appointed last year, would the Government have stepped in? Not a bit of it, and the result would have been simply ruinous. He granted that the call would be hard on some of the shareholders, but it would form a nucleus of future capital, and would return 5 per cent, interest. They had every reason to look hopefully to the future. The fact was that the Bank had been greatly damaged by some of its own shareholders ; and, had it not been for some of its patriotic friends its position would have been worse. When people came to him he advised them to have faith in the old institution. The Bank had been sadly mismanaged in the past, but he believed they had now at the helm those who would steer tho good old ship safely into port. Four classes would be benefited by the Act just passed— first, struggling settlers, who if the Bank closed would be bound to be crushed, as other banks would not take their account; second, working men who he hoped would realise that if the Bank had closed the whole community would have been in a state of paralysis, and labour could not have been employed. The Government had shown intelligence and backbone, and he for one felt deeply grateful to them. Another class that would benefit would be the shareholders themselves. He believed it would be the salvation of many of them, as, sup.posing the Bank had gone into liquidation, all reserve liability would have been called up at once. A Shareholder : There were assets as first call. Mr. Rilet : Assets on forced sale would not realise much. In answer to Mr. Blanchard, he asked how could the directors have given information they had now at the last meeting He was thankful the directors had sufficient honesty to show the real position, and he hoped they would go on as the Bank now had a good future, especially if they secured the business of the Colonial Bank. It was monstrous to say that the Colonial Bank was in the same position as the Bank of New Zealand. He knew that it was doing good business. Mr. Tanner, solicitor, Wellington, seconded the resolution. He pointed out that the two millions granted by the Government belonged to the people of New Zealand, and it was absurd to talk of it even being given up to the Bank. In giving the guarantee the Government had acted as statesmen. The present directors had not assisted in bringing the Bank into its present position. Those who had were greatly to blame, and what had led to it occurred a decade or more ago. Shareholders had the call spread over a number of years, and that was some satisfaction. There was something in goodwill, and in getting their finances into good order with the guarantee at their back to give them hope that they would get their money back. Mr. George Allen, as one of the original shareholders of the Bank of New Zealand, said that much as he had been opposed to some of the actions of the present Government their action iu connection with the Bank had been the right thing in the right place. On thinking over the ramifications of the Bank he thought it would have been a bad thing for the Bank to have gone into liquidation. He d;.d not see that the present directors could have done other than they had done, and he believed the resolution just moved was right. . Mr. Charles Smith hoped the resolution would not be passed in the form it was in, as it was absurd to say they knew the Bank was on a solid foundation. He thought if sent to England in that form it might raise false hopes, and if put in that form he would have to oppose it. The President said it was quite correct to say the Bank was on a solid foundation. Mr. Martin Kennedy, as a shareholder in the Bank, had pleasure in supporting the resolution. He, like others, had suffered, having only bought in some six or seven years ago. He thought thanks were due to Parliament for its action—not of any particular party, for both sides of politics had assisted. They had been blamed as directors for approaching Parliament, but there was an obligation by deed of settlement, giving Parliament power to wind up the Bank when half the capital was gone, and when the directors went to the Government the capital was all gone. If liquidation had been forced, the first thing the directors by the deed of settlement would have to do would have been to call up the reserve liability at once. That was the position last year, and coming to this year, he said the Government was giving them half-a-million, and if they got five per cent, on their shares they would be getting some of their money back. If they could not pay their calls they might be able to finance them. As to the profits, they believed the Bank would earn what the directors had put forward. It would not have been right for the directors to have taken a step that would have exposed them to loss. Ultimately the colony might lo3e something, but they hoped not. It had been asked what was the goodwill. In the first place, there was this half-million, and if things looked up they could bring back the £500,000 worth of shares. That was possible, and it might be to the interest of the Bank to try and redeem this other half of the goodwill. When the full particulars reached shareholders in Loudon they would join in this resolution that Parliament had done a thing for which they as shareholders had every reason to be thankful. Mr. Riley, in reply to Mr. Smith, said that there was no bank in the colonies in such an impregnable position. The assets had been written down, and it had a trading capital of three millions. He had great faith not for large dividends of 15 per cent., but of reasonable profits, and as a large shareholder himself he had great sympathy for shareholders in general. If the Bank had closed the colony would have suffered fresh taxation, which would have had to be levied, and every colonist would have suffered. On being put to the meeting the motion was declared carried unanimously. The President returned thanks for himself and the other directors. They had had a trying time, and had done the best for the shareholders. Mr. Martin Kennedy stated that there was perhaps a feeling that because the Government had appointed the president auditor, and directors of the Bank, the business of trading firms would be disclosed. He stated that nothing of the kind was possible, as directors all took a pledge of secrecy, and he for one would not occupy a seat on-the Board if anything of the kind was possible. He expressed the opinion of the President and auditor of the Bank. Mr. G. Allen moved a vote of thanks to the officers of the Bank for their services during the past year, which was seconded by Mr. Barry, and carried. Mr. Andrews, auditor, responded for the officers. In reply to Mr. Blanchard, the President stated the next half-yearly meeting would be held in February, as provided by the Act. The meeting then terminated.

THE GOVERNOR'S ASSENT. Wellington, Friday. The Banking Bill received the Governor's assent yesterday.

PRESS COMMENTS. Melbourne, September 6. The financial editor of the Argus, referring to the action of the shareholders of the Bank of New Zealand in London, states that it is difficult to see what good can result by the adoption of their views, aud says denunciation of Mr. Ward's statements in London will not mend matters. The demand for liquidation has nothing to justify it, for if the directors choose to keep the Bank open and regularly pay its creditors their claims, and the Government is backing it up, a windingup resolution can hardly be carried. The shareholders unquestionably have been badly treated, first in being led to contribute a million capital, and then having the control of their affairs taken from them by the Government, which has probably entailed upon them a greater loss than would otherwise have occurred. What is to be feared from the whole business is that the English courts may be brought into collision with the Courts and Parliament of New Zealand. This would give colonial credit a great shake. The Government should not have interfered without being prepared to guarantee creditors aud relieve the shareholders of further liability. If a majority of the shareholders declare in favour of liquidation, a very peculiar condition of affairs will I be created.

The Age says the London shareholders of the Bank of New Zealand appear not to be well-informed of the gravity of the position. Doubtless when full particulars are furnished as to the absolute necessity for the action taken by the Government wiser counsels will prevail.