BANK OF NEW ZEALAND.

New Zealand Herald, Volume LII, Issue 15948, 19 June 1915, Page 4

BANK OF NEW ZEALAND.

I i r ! THE CHAIRMAN'S REVIEW. I> • '• ,' V ' ( < \ "i ■ - ■' ';• FINANCES AND - WAR. ' • ' - . ' .* - '• ' I- .; • . » . : , • 1; j•. INCREASES IN DEPOSITS. ' EXPORTS AND IMPORTS. I • •«-s ■ l \, y v*■> y 4 v .' f ■ \ [DT TELEGRAPH.— CORRESPONDENT.) WniiUKG'iONi Friday,. ' The ordinary general meeting of the shareholders of the Bank ol! New Zealand as held at the head .office to-day. - The chairman of directors, Mr. H. Beauchamp, presided. In moving the adoption of the report of the directors and the balance* sheet, Mr. Bea'uchamp said "The momentous events! of July and AupuF/t last, • involving the British nation in the great European conflict which is now raging, and the consequent unprecedented conditions under which the finances, trade, and commerce of the Empire have been conducted; will, 110 doubt,-have made the bank's - operations for the year of more than usual interest to shareholders. It will have been with satisfaction, therefore, that you have perused the directors' report and balance-sheet which were distributed some days ago, and from whioh you would see that the board, after mak- j ing provision for all bad and doubtful j debts, depreciation of investments, and other appropriations, was able to recommend a distribution to shareholders on the same scale as in recent years." The Reserve Fund. In the course of his reference to the principal items in 'the balance-sheet, the chairman mentioned the reserve fund. "Last year," he said, "this fund was increased to £1,550.000 by the transfer from profits of £175,000. I, have pleasure in announcing that, this year, by the addition of the premium received on now shares—less expenses of issue, £365,536 — and the transfer from profits which the board proposes to make, £84,464, our reserve fund will stand at the substantial figure of £2,000,000. Of this amount, £1,000,000 is invested in British Government securities " The notes in circulation—£l,676,osl— are more by £686,169 than at March 31, 1914. This large increase is due to bank notes having been legal tender since the commencement of the war. Gold ha 3 been gradually withdrawn from circulation, arid notes have replaced it.' "" ■ ~ -Profit and Loss. " The _ net profits for th» year, after paying interest on guaranteed stock and making all necessary ■ appropriations,' including , provision for the bank's 'annual grant to the provident - fund as well as a bonus to the staff, and, the allocation of £50,000 in reduction of bank premises and furniture accounts, amount to £319,486, as compared with £308",490. at ' March 31, 1914. 'Adding 5 , the amount brought forward from last year—-£6l,and deducting the amount of interim dividend at 6 per cent, paid in December—£loo,699-? tho' sum available for distribution is £270,394. 1 'The ' directors now propose 1 to pay a further dividend of 6 per cent, and a bonus of 3 per cent, 011 ordinary and i.'f B" preference shares, making 15 per cent, i for the year, and a further . 4 per cent, j on " A" preference shaves, making 10 per bent.: for the year. i The distribution to shareholders will theroloro • amount to £229,459 for the year, Of tho balanco remaining, it is proposed to transfer £84,464 to the reserve fund, and to carry forward £57,170. V ; ' r ->•. ; ..The Guaranteed . Stock. ' " With regard to the guaranteed stock, this appears at '■ £528,988, as against £1,000,000 in . the previous balance-sheet. The 'old 1 stock matured on July 19 Inst, and, the bank's finances being in a strong i position, the board decided not', to underwrite the new issue, but to give existing holders . the option of ■ exchanging ■ their stock. The amount shown in the balancesheet representsthe - extent to which holders have availed of the option. The balance of the old issue, with the exception of a few thousands that have net yet come in, lias been paid off. The present state of the English money market is an unfavourable time to issue the balance of the new 1 stock; but the bank's finances being easy,"' the bank is able, without inconvenience, to await the arrival 7 of a favourable opportunity. . . - ' - Volunteers from, Staff. ' x "Tlio numbers of our staff applying for leave of absence to enable them .to join the New " Zealand " Expeditionary Forces, are largely in excess of those which it has been found possible to spare. The bank's business is such that it cannot bo carried on by _ the employment of casual hands as required. A certain proportion of' the staff' must be men with special banking knowledge and experience of our methods of working. We ore adjusting the staff as we have opportunity, and are allowing more men to. join the ranks, of the contingents as they can bo spared. "To enable us to set free still more men it has now been decided to engage a limited number of women clerks, whose services, it is considered, can be satisfactorily utilised in certain departments of our work. As these clerks are gradually introduced we shall be able to liberate more men for military service. "In recognition of the good services of the staff during the year, the board has again paid them a bonus of 5 per cent, on salaries. In this bonus the members of the staff scrying with the British forces shared on the basis of full pay. " ■*'' f ' " During the year, steps to extend the benefits derivable by the staff from 1 the Officers' Provident Association have been taken, and carried to a successful conclusion. ' ; ■■ •' The . Aflairs 0! Samoa. " It was our intention to have placed before you at this meeting the proposed amendments in the deed of • settlement. I regret that it was not found possible to get all the necessary preliminaries arranged in time. The proposals have, however, been circulated among tho shareholders and a special general meeting has been called for October 22 next to deal with them. " Of German territory occupied by Great Britain since the outbreak of the war, New Zealand is most interested in Safnob, owing to its proximity to the Dominion and the fact that it was the first captured—and that, too, by a New Zealand Expeditionary. Force. German currency in Samoa has been lately superseded by British; and a branch of this bank has been established at Apia, the principal town of German Samoa, The future of Samoa will not be determined until' the close of the war. Meantime the country is 'being held by New Zealand, on account of the Imperial authorities, and is under military control. Effects of the War. "It is impossible for me to avoid refer* ence to the great conflict that _ is now convulsing the world. The war, in which practically all the great Powers are engaged, has had, "and must continue to have, a very disturbing influence on finance, trade, and commerce. Great and profound economic changes have occurred, and no one can as yet faintly estimate tho far-reaching effects of the titanic struggle. " "The measures adopted by the British Government 'to/ meet the financial difficulties precipitated by the - war were outlined briefly in my last address. ' They ! have proved on the whole, effective, and , have gone far to assist in maintaining the , pre-eminence of, London as the world's ' great financial centre.' - Whilst other conn- : tries have found it necessary to prohibit • the export of gold, Britain has preserved i its traditions" and maintained ' throughout ; a free gold market, except, of course, for exports to enemy States. The opening' of the London Stock Exchange, which,took

place on * January. 4, was attended by the imposition of very stringent conditions, designed to prevent, the* Stock Exchange from being utilised as a channel for realisation of enemy ' securities. ' ;' ).* _' $ " Recognising the. important; part which financc must play in. the war, the British Government has; determined to conserve British financial resources to the • utmost extent possible, in. order that supplies for war purposes may be available,] as and when required. With that end in viow, it has practically taken control of all new capital issues in Great Britain, by providing that no issue shall be made that has not been previously approved of'by. the British Treasury. The principle upon which the Treasury will discriminate upon any proposals made to it, will be whether or' not "the contemplated issue can be shown to" be 'advisable in the national interest.' A - Financial Reservoir. "This regulation, it will be at onco seen, closes the London money market to all issues of capital on account of undertakings unconnected with the British Emfire, and to those even within the' British Empire" that' are not in 1 close association with Imperial interest. ' The result is that the vast stream of credit constantly flowing to London frbm Britain's worldwide investments is accumulated there as in a financial reservoir, the outlet of which is controlled by the British Government. In this way, supplies of that essential sinew of war—money—are assured, not,, only for the British Empire itself, but also for her allies. " The facility with which all needs liavo so far been fully met, at rates fluctuating —as far as the British Government is concerned— a little over 3 per cent, to a little under 4 per cent., is at once a testimony to the effectiveness of the measures adopted, and to the continued strength arid soundness of British credit in these credit-shaking; times. _ I do not wish to be understood as minimising the serious financial and economic bearings of the position In which the world has been placed by the war. One cannot but regard with serious misgivings the diversions of such immense volumes of capital from remunerative enterprise to the business of dostructten,-"which leaves only devastation and no tangible asset in its wake. Economic Problems. " The mind is fairly staggered when it thinks of the economic problems with which the civilised world will be fared when this—the greatest of all wars—has been brought to a termination. The figures that will be represented by the actual war expenditure, by the loss of income resulting from the paralysation of industry, and by the enormous value of property absolutely destroyed, are at present quite unthinkable; and when we add to them that greater, because irreparable, loss not measured in motley, but in human lives, we turn from the contemplation of it all with a distracted brain and a sickening heart. "As to the ultimate issue of the, conflict. I do net think thero can M any room for doubt, if the British nation can be brought to realise that the greatest crisis in its history has arrived. At the opening of the war every Britisher faced the position with a confidence, born of past experience, in the conviction that the nation would rise as one man to meet the emergency. I am, however, bound to confess to a feeling of the keenest disappointment and to some apprehension when I read of the recrudescence of labour troubles in Great Britain at such a critical juncture, and of the consequent threatened deficiency in the supplies of those munitions of war which are absolutely indispensable if our brave soldiors at the front are to fight their battles successfully. i War Bisk Insurance. "The British Government, feeling the importance of confidence as an essential to the maintenance of trade, announced, in the early days of the war, the establishment *of a Government insurance bureau through which cover'for war risk I could bo obtained, " charging for this national service the lowest possible rates consistent with departmental . solvency. Tills facility has been of the greatest; assistance to shippers ~ to and from all ports of the British Empire. It has enabled them to obtain full cover ' for all their shipments 'at reasonable rates. . It is . questionable whether, without it, , underwriters would 1 have been able to ,meet the demands upon them. In any caso the ratos for war risk would probably have been almost prohibitive. The bank's services have been at the disposal of its shipping customers, and the aggregate of war risk cover effected in London through the bank's agency has reached a large total. T'/' ' . " /" "The measures which it was found necessary to adopt in this Dominion, viz.: —The notes legal tender proclamation, the prohibition of gold ' export, and the Mortgages Extension Act, are still in operation and likoly to be continued until the close of tho war at any rate. The Moratorium. "The last-named Act has, unfortunately, proved somewhat unsatisfactory. Designed primarily for the protection of mortgagors against possibly unjust and arbitrary action by mortgagees, it has no doubt been of much service in preventing hardship to mortgagors whose liabilities were maturing and who were' unable to make provision for them.- It has enabled them to carry on their mortgages at the rate of interest provided in tho mortgage deed, and has, in that way, no doubt assisted to keep down the value'of money for mortgage purposes, which runs to-day at from to 6, per cent, per annum. But tho Act has been taken advantage of by quite a number of mortgagors who, being in the enjoyment oS a low rate of interest, have, whilst possessing the means to discharge their liabilities, claimed the protection of the Act and - utilised their available funds in - lending on mortgage themselves at higher rates' of interest. This is, of course, a perversion of 'tho benefits conferred' by' the Act, .and 'it is understood that, in the coming Parliamentary session the matter will receive attention at the hands of the Government. - < . ' ;. " We are not at all sure that tho mortgagors in such cases are not over-reaching themselves, or that those who are bona fide claiming the ■ protection of the Act aro wise in doing so.. - . "V -i" , ' t Money Values. " There is no reason to anticipate that a substantial drop in money values will take place after the conclusion of the war. Not a few in a position to judgo take the view that there will then be still further appreciation, ,and my own opinion is that those who are re-arranging their mortgage liabilities, as they mature, on the nest terms possible, aro acting with a measure of prescience which futuro events will fully justify. " The prevailing conditions in the great monetary centres of the world are bound to be reflected, sooner or later, in our local market; and, as I see no indication of easing prospects in the centres, I am forced to conclude that money values are likely, for the present, to remain comparatively high. It is true that there is not, in tho meantime, . any shortage of money, but this is largely owing to the fact that enterprise is stagnant, and that trade generally is running in much restricted channels. When the future is more assured, the supplies of floating capital will probably be quickly absorbed and money may become scarce. " After the war is over, if the conditions of tho international settlement are such as hold out prospects of a lasting peace and of cessation of competition in armaments, there may bo after a few years a permanent drop in money values, but I do not think that point will be reached for -some' time. These are, how, ever, merely . ray personal views and I wish it to be understood that I lay no claim to prophetic attributes. -. "As far as wo >are concerned as a board, we consider that" under normal conditions wo are justified in regarding ourselves as your almoners only to a small extent, but existing circumstances being so exceptional, we have felt constrained to subscribe a total of £3050 direct to the Relief Funds. ' We .have also remitted moneys of various relief organisations to London free of exchange, which service has -been equivalent to a further , large donation, as' exchange on London has commanded a very high premium for many months, and still stands at a high level. This- further donation, thus indircctly made, , is equivalent rto • ' /•••

upwards of £1800. . , When we add to this tlio half-pay which we are allowing to all our officers - on active service with the forces, and which at present amounts to some £7800 per annum, it will be seen that we are making a large contribution for war and relief purposes. We have no doubt, however, , that, in thf circumstances, our action will receive your hearty endorsement. Trade, Industry, Internal Finance. " The New Zealand quarterly average banking statements indicate an easy financial position in the Dominion. Comparing the figures of March 31 last With those of March 31, 1914, we find the following differences in the aggregate averages of all the banks:— ' 1 DEPOSITS. Interest bearing— ... ... flin'on Non-intorest bearing—increase ... 2.4H2,Jbi £2,798,990 ADVANCES. —decrease ... £382, Other advances— 384,324 Net increase £I|6j4 Improvement during the 12 months in the position of the public with the banks ... .:. - - *2,797.356 "The Post Office Savings Bank figures show similar large accretion of funds. The excesses of deposits over withdrawals for the half-year ending March 31 last reached the large total of £1,188,071. The Exports and Imports. "These improvements have been contributed to' largely by (1) the increased value of our exports, and. (2) the reduced value' of our imports—the margin between which will probably be' found, when the returns for the year ended March 31 aro complete, to be the highest that has been touched for many years past. "For the year ended December 31 last —the latest date to which complete returns are available —the figures are Exports (excluding specie)... £ 26,253,900 Imports (excluding specie)... 21,144,200 Surplus exports £5,109,700 "The surplus for the Previous year ended December 31, 1913, was £1,156,731. "The increase in the exports is due in a large measure to the enhanced prices commanded' by our primary products. The decrease in imports is attributable to several causes:(l) The caution exercised by merchants and importers whew ordering supplies in the early days of the war. 2. A lessened demand consequent upon the more economical style of living that has been in vogue since the .war began. 3. The impossibility of obtaining many lines of merchandise from Germany and Austria, and the inability of British manufacturers and exporters to fill orders. 4. The lack of tonnage and /the difficulty of shipping owing to congestion at the London docks. Increased Credit Balance. "The export figures for the quarter ended March 31 are available and amount to £11,205,030, as against £9,993,100 for the quarter ended March 31, 1914. The import figures for the, same quarter are, however, noT*complete, but the Customs revenue for the quarter is said to amount to oply £737,000, as against £935,000 for the quarter ended March 31, 1914, showing that tflero has been a substantial failing off in importations. This is, of course, all in the direction of widening the margin between imports and exports, thus increasing the credit balance on the Dominion's trade as a whole, and, t consequently, the funds available here. "Calm Before the Storm." j Financial ease is apparent, but it is ease' which, 'like the calm before the storm, may presage strain and stress later on." The i accumulations in the hands of the banks are undoubtedly due to apprehension with regard to the future, and a desire on the part of the depositors to be prepared for possible eventualities. This is clear, from the .fact that the increases in deposits are principally in the noninterest bearing class; i.e., the current accounts. This is not an encouraging feature because it indicates, to some extent, commercial and industrial . inactivity. Builclinsr. except in _ the way of Government undertakings, !• is largely at a standstill ; and 'investors ' are disinclined, to enter > into commitments. -Business on the stock exchanges of the Dominion is also very restricted. A _ p\-"" : , . " At the same time, of shares in . regular dividend paying financial and industrial companies 6tand at a satisfactory level and shares are well held, there being few sellers. ■ At the commencement of the war a sharp decline in market values occurred, but as confidence returned recovery became rapid, and today, there are few stocks in favourite companies which can be purchased to yield more than 5 to 6 per cent. Freezing Facilities. "The conditions of the Dominion staple industries leave little room . for complaint, As a consequence of the deficiency of f'eez-' ing and storage facilities, movements have been initiated at various points throughout the Dominion to establish new freezing works and refrigerating ; stores. In considering all - such projects it ' should, of course, not be overlooked that the present is &' time when exceptional and abnormal conditions prevail, and that, in ordinary circumstances, the existing facilities for dealing. with the frozen, products of the country are probably,* in most cases, quite adequate. It will, therefore, be politic that _ the promoters of such schemes should consider ; carefully whether or not there is a permanent opening for the establishment ' which they have in contemplation. If what they have' in. view is designed simply to meet the present temporary necessity, wisdom would, I should say, dictate the abandonment of the proposed venture. - The Ou'ilook. *• \ ' > " I think we may look for a continuance of good trade. The end of the war may be . followed by heavy taxation and unemployment in those ccnmtvieß now engaged in hostilities, but. New Zealand is still bound to find an outlet at remunerative 1 * prices in Great Britain, the Continent of Europe, and the United v States_ of America for her wool, .frozen meat, dairy produce", etc. It would, of course, bo unreasonable to expect the abnormal rates at present ruling for the articles enumerated, but there is little doubt that the demand which will then exist, for our primary ..products will enable us to face the future with equanimity, and assist us in discharging the heavy liabilities we have directly undertaken in connection with the war. • "The war Is costing the Government a substantial sum, and I am convinced that prudence and reasonable economy are being exercised'.in the expenditure. The cost of the war must be met by increased taxation, and no doubt we may expect to have proposals submitted under this head in the course of a few days. The country is well able to face this increased taxation; indeed, looking at all the circumstances, it was never better fitted to stand such a pressure.'.' Combination with Government. Mr. Martin Kennedy, in seconding the motion- for the adoption of the report and balance-sheet, congratulated the chairman upon his address. ' The chairman having so fully reviewed the conditions, there was little for him to add beyond a word of congratulation on the position of the bank. No doubt it was a matter of great satisfaction to them all that notwithstanding the trying time in the financial world they were able to lay such a report an4f balance-sheet before the shareholders. He commented specially on the fact that the reserve fund had now reached the' £2,000,000 mark. At one time,, ho mentioned, he was strongly opposed to the Government being permitted to take up any shares in the bank. "Circumstances have, however, led to radical changes in my views in this , respect, and I am now prepared to admit that the combination with the Government is a -happy one and calculated to achieve the very best results both for the bank and for the country." A Shareholder's Criticism. ' Mr. S. Kirkcaldie regretted he could not join in congratulation as to the posi;tion of the bank. He proceeded to refer to special items of the balance-sheet. II was a surprise to most shareholders tc

learn that the item of guaranteed i stock had been reduced. Ho criticised the action bf the directors in ; failing to renew the full amount of this guaranteed stock authorised by the Legislature to the extent of £1,000,000, and bearing interest at per cent, per annum. He referred further to the reduction in profits disclosed by the fact that a smaller sum was transferred to the reserve, and to the decrease in the item under heading "bills discounted." He suggested that the amount to be expended in the proposed- building scheme might be saved for the time Dr. Prendergast Knight said' that If the bank had accepted the offer made to if, .it could have obtained the whole amount of guaranteed stock, but that offer had been declined, and £500,000 had been subscribed at no cost to the bank. This was an expression of confidence in the bank. With regard to building, it was plain to them all that the bank must extend its premises. The amount of the original £2,000,000— had now been reached in the reserve fund. • Mr. T. S. Weston also disagreed with Mr. Kirkcaldie's criticism. Chairman's Explanation. The chairman, in replying to Mr. Kirkcaldie's statements, said it would have been exceedingly bad business to pay \ 4 per cent, per annum when the ruling rate for money in London on short call amounted occasionally to only 1 per cent, per annum. He also explained that prior to the maturing of the old 'debentures, an offer to underwrite the whole of the new issue for 1 per cent, was made to the bank. The bank, however, decided not to accept this offer, but proceeded to renew by direct negotiation, and succeeded in placing in this way £528,988, at no cost whatever to the bank. This was an achievement of which t the board was proud. As to the diminished profits, this was most easily explainable by the large amount that . was required for depreciation in gilt-edcred securities. Had they been passing through normal times, with the profits of last year they would have been able to place to the reserve a larger sum than was carried to the reserve for the previous year. That would give some indication of the amount required for writing down all gilt-edged securities to the rates ruling 011 the Stock Exchange on March 31 last. As to the reduction under the heading " bills discounted," this was explained by the financial ease now obtaining in the Dominion. It was emphasised by the increased indebtedness of banks to the public, to the amount 'of £2,797,356. This was a natural corollary to the reduction in the item of bills discounted. With regard to the bank's building assets, the following figures were a sufficient answer:— value £420,208, manager's valuation £781,708, balance-sheet ■ value at March 31, 1915, £451,867, land tax valuation £777,306. — The motion for the adoption of the bal-ance-sheet was carried without further discussion. The Chairman's Services. In moving a very hearty rote of thanks to the board of directors and staff, Mr. John Mill said he was sure there was not cno shareholder but woulijl agree that the board and staff deserved great credit for the way in which they had handled the business of tho bank during the last few years. He hoped the day was not far distant when the chairman of the institution would receive the reward , that was due to him for the services he had personally rendered to the bank. Dr. Knight seconded the motion, which was carried unanimously. , The chairman thanked the meeting for its expression of confidence. i Mr. W. Callender thanked the meeting on behalf of the staff. A {suggestion was made by Mr. Weston and heartily approved that at the end of the ■war the names of the bank servants who had fallen be engraved on a roll of honour and placed in the board room. s -