THE COLONIAL BANK.

New Zealand Mail, Issue 230, 5 February 1876, Page 16

THE COLONIAL BANK.

(From the New Zealand Times.) The half-yearly meeting of the Colonial Bank at Dunedin did not pass off without some discussion, in which the policy of the directors was criticised with considerable minuteness. Mr. McNeil appears to have been the principal speaker, and his opposition took * the shape of a grumble at the expense of the management. He thought, as the Daily Times puts it, "that the officers of the bank " should have been paid less and the " shareholders more." In other words, it was argued that by paying a lower scale of salaries the concern might have paid a dividend. Now, it is doubtless disappointing to shareholders not to receive a dividend, but we join with our Dunedin contemporary in endorsing the policy of tha directors. The very best banking talent procurable has been employed, and as a matter of course the highest salaries are paid. In starting any new institution, notably that of a joint-stock bank, the proprietary have a right to expect the directors, to whom they entrust the management, to employ the best available talent. If they do not, they incur very grave responsibility indeed ; and as salaries in the banking business, in New Zealand more especially, have advanced very considerably of late years, the Colonial, being a new institution, feels the pressure more than oldestablished concerns. And the Colonial Bank was established at a time of considerable inflation, when great expectations were cherished by speculative investors. The South British Insurance Company proved so great a success, that the National was started, and during the first month or six weeks of its existence large sums were made by speculation in its shares. The Standard Insurance Company followed ; but the speculative mania was not satisfied, and advantage was taken of it to float the Colonial Bank. Its capital, however, was mainly subscribed by persons who held as an investment, and these are as a rule well satisfied with the management. Speculative investors, however, have been disappointed. They expected a dividend from the first, or to be able to sell at an advance in anticipation of a dividend But it should also be remembered that times have greatly changed since the Colonial Bank was established. Money is not nearly so plentiful ; _ and the ruinous competition for deposits at high

rates amoiigst the banks must have seriously affected the Colonial almost from the start. This fact alone might account for the non-payment of a dividend last half year. On the whole, we agree so thoroughly with the view expressed by the Otago Daily Times on this subject, that we cannot do better than reprint a portion of its leading article. Our contemporary says : We understand that Mr. McNeil and those who think with him object to the management upon the score of expenses incurred being in their estimation excessive, rather than to the actual disposal of the profits accrued. If there are any who think that these profits should have been devoted to paying a dividend we may point out to them that until the shares are saleable at a premium, orlat least at par the directors have a plain duty to perform about paying dividends. The value of shares m the market is an admirable and certain test, and we hope that the directors mil continue to be guided by it. They are in duty bound to capitalise profits until shares are at par; afterwards their hands are free, and it becomes a Question of judgment how profits may be best used. >JS not unreasonable. You have, he says a concern whose capital is a quarter of a, million, Mdyoulim only a profit of five thousand pounds. This is not enough. The principle, as Mr. Gillies said, is quite correct, but it must not be applied to a large monetary institution like a bank too rigidly or too soon The floating of the Colonial Bank was a herculean undertaking under the circumstances of the colony and place, and its progress and conduct should not be tested too precisely by the mere question of its profit and loss account in the first months of its existence. Three years hence, or even two, we shall be quite prepared to agree with Mr. McNeil, and apply Ins test as rigidly as he pleases. At the present and for some time to come, we shall think that the directors are doing well to push out their branches, whether they pay immediately or not—to secure the services of the best men, even though their salary sheet tots up to what seems a very large amount. In the long run such a policy is sure to pay ; we will go further, and say that it is the only policy that will pay ; and we. trust that the directors will pursue lt quite unmoved by any criticism. We shouldlike to see our local bank represented in every principal centre of industry in the colony, and we hope it will be by-and-bye Abraham Lincoln used to say that his gunboats should float wherever the ground was a little damp. We should like to see the Colonial hanging out its sign wherever there was a village with a few dozen surrounding farmers with money to deposit. we have sSd little about the detail of the balance-sheet because it tells its own tale. The deposit account is the best test of the bank's progress m the confidence and regard of the public, and Mr. Larnach very properly drew attention to the very satisfactory result shown here. We are sure that the public wish the Colonial every success, that they are prepared to support it, and that they have every confidence m the wisdom of the directors. In conclusion, we think the directors should be grateful to Mr. McNeil for raising the discussion he did, because the administration of the bank has become better known to the shareholders and the public, who must be convinced that permanence and stability are the watchwords of the Board. The Colonial Bank fills a long felt void in New Zealand banking institutions ; and so long as it is administered in the interests of the public, of course taking due precaution for securing the shareholders' special interest in the concern, so long it will growin public favor. Up to the present writing it has fulfilled every promise of its promoters, who may reasonably look forward to a fair return on their capital and enterprise at no distant period. We cordially wish the Colonial Bank a prosperous future.