BANKS' EARNINGS

New Zealand Herald, Volume LXX, Issue 21382, 5 January 1933, Page 3

BANKS' EARNINGS

DIVIDENDS AND CAPITAL TREND TO LOWER PROFITS HEAVY DECLINES LAST YEAR The induced earning opportunities of trading banks, the heavy decline in profits, and the reductions made in distributions to shareholders during 1932 are again emphasised in tho review of Australian and New Zealand banking profits during last year and their distribution, which is published in tho current issue of the Australian Insurance and Banking Record. The net profits and distributions of the 11 ordinary banks, exclusive of tho Commonwealth Bank of Australia, arc .summarised, tho dates of tho balancesheets, ranging from October 12, 1931, to September 30, 1932. Tho reports published during the year, the review states, display more fully tho tendency to lower profits shown in tho previous yoar s accounts. Low prices, the general contraction in business, the shrinkage in the value of oversea trade, which affects exchange transactions, and the fall in rates of interest, which lias operated more promptly on advance rates than on the amount payable on tho largo volume of fixed deposits, have combined to reduce tho earning power of tho banks, while in nearly every case the rates of dividends declared a'ro considerably less than two years ago. Reduced Net Profits

Tho aggregate net profits disclosed during 1932 are less than in any year as far back as 1912, although in the meantime shareholders' funds employed have steadily risen from £31,606,875 in 1912 to £83,454,367 in 1932. The net profits of tho 11 banks show a reduction of £1,781,802 as compared with 12 banks (the Australian Bank of Commerce having been amalgamated with the Bank of New South Wales within tho period) for the previous year, and the dividends a reduction of £1,227,060. Iho profits for tho past year amount to £2,622,771, which compares with £4,404.573 in 1931 and the maximum of £6 449,565 reached in 1926. The dividends amount to £2,937,758, comparing with £4,164,818 in 1931 and the maximum of £5.213,456 in 1928. The dividends for the past year are less than per cent on the total paid-up capital, as against almost 9 per cent in 1931, while as compared with tho total shareholders' funds, inclusive of reserves, they are equal to a little over 3,'t per cent, as against slightly over 4£- per cent in 1931. Net profits of the ordinary banks and the total capital and reserve funds are shown for each year since 1912. Tho ratio of neb profits to the capital employed last year was 3.14 per cent, again easily the lowest ratio in the period reviewed. It compares with 5.28 per cent in 1931, the previous lowest ratio, 7.11« per cent in 1930. and 10.19 per cent in 1921, the highest ratio attained within the period. Fluctuations Since 1912

The total amount of r.et profits reported and the -total amount of dividends distributed by the ordinary banks since 1912, and the proportion of the latter to the former, are compared in another table. The net profits, with the exception of decreases in 1915. 1916 and 1922, have risen from £2.954,914 in 1912 to £6,449,565 in 1926, which was the. peak year. Slight fluctuations occurred in the following three vears to 1929, after which there was a rapid fall from £6,359.181 to £5,908,074 in 1930. £4,404,573 in 1931 and £2,622,771 in 1932. V 1 . Dividends distributed lose steadily from £1.713,453 in 1912 to £5,213,456 in 1928, with a gradual decline to £5,038,312 in 1930, followed by a steeper descent to £4.164.818 in 1931 and £2.937.758 in 1932. The dividends declared during the past vear were in Uio aggregate greater than the net profits and in a number of instances the undivided profits show a decrease. Prior to- this, the proportion of net profits distributed had risen from 57.99 por cent in 1912 to 94.55 per cent in 1931, the principal increaso having occurred since 1921, when tho proportion was 63.05 per cent, as against 71.35 per ' cent in 1916. the highest distribution previously made. Tho total amount of appropriations for other pnvposes than dividends is represented mainly by additions to reserve funds, writing down of bank promises and votes to staff funds. The only amount transferred to reserve funds out of profits during tho past year was £15,000 by tho English, Scottish" and Australian Bank, Ltd. The reserve funds of tho 11 banks now stand at £35,965,000, against £37,061,880 a year ago. Unappropriated Profits The amount added to the total amount of unappropriated profits in 1930 was £53.011. In 1931 there was a net decrease in these profits of £37.644 and in 1932 a not decrease of £353,987, apart from a t/ansfor of £85,000 from exchange provision account to profit and loss account. After giving effect to these appropriations the reserve funds amount to £35,965.000 and undivided profits to £1.542,131, togetlior £37,507,131. Adding paid-up capital, £45,464,487, the total shareholders' funds arc £82,971,618, against £85,376,870 a year ago, and £85.072,911 two years ago. The average rate of dividend per annum on capital in 1932 was 6.39 per cent, compared with 8.99 per cent in 1931 and 10.90 per cent in 1930. On ' capital, reservos arid undivided profits the average dividends for tho .same three years were 3.49, 4.89 and 5.96 per cent respectively. The profits of the Oommonwoalth Bank of Australia for tho year ended June 30, 1932, consist of £441,726 from banking business and £62,188 from the Rural Credits Department; together £503,914, exclusive of tho profits of tho Note Issuo Department. Owing to its exemption from taxation, tho Commonwealth Bank profits cannot Iks compared with thoso of the ordinary banks. GOLD AND SILVER QUOTATIONS IN LONDON LONDON, Jan. 3 Gold is quoted to-day at £6 3s 8d an ounce, compared with £6 3s 9d on December 31. Silver is quoted at an ounce spot and 16 9-16(1 forward, compared with lbgd and 16 9-16(1 on December 31. The quotation for silver at per standard ounce is 16jd and at per fine ounce 1.7 13-.16 d, same as on December 28. BRITISH WAR LOAN British Wireless RUGBY, Jan. 3 The 3 2 por cent British War Loan is quoted to-day at £9B 13s 9d, compared with £9B 15s on December 9. P. AND O. DEFERRED STOCK LONDON, Jan. 3 P. and O. deferred stock 'is quoted today at 16s compared with 15s 9d on December 30. CALL AND DIVIDEND , LIST Dividends— Duo Nut. Bank N.Z.—int., 4 p.c. p.a. Jan. 7 King Solomon—first, 25 p.c. . . Jan. 9 Howard-Smith—prcf., quarterly, 0 p.c. p.a Jan. 9 N.Z. and River Plate—final, 31 p.c Jan, 17 Union Bank—intorim, 2b a nhare Jan. Broken Hill South—int.. Is a eharu i'eb. 10