BANK OF NEW ZEALAND.

New Zealand Mail, Issue 866, 5 October 1888, Page 24

BANK OF NEW ZEALAND.

(per press association.) Auckland, October 1. The New Zealand Herald has the followin<* . _ “We learn from an authoritative source in London that applications have already been made thero by financial people of the very highest standing, quite outside or what have been heretofore bank circles tor a large proportion, if-not the whole, of the new issue of the shares of xfche Bank of New Zealand. The deputation sent to Loudon by the shareholders committee have been able to satisfy the best people that, notwithstanding the kg writing off to come, or probably in consequence oi it our Auckland institution is worth taking up Influential finance connections in Ruglaud aud new blood on its Boards, as well in London as in the Colony, were what the bank wanted to set it on its feet. The lifting of the cloud which has for some time been hanging over the bank will be an important factor added to the others which are so distinctly working for a revival of our prosperity.” SPECIAL MEETING. Auckland, October 2. A special general meeting of the shareholders in the Bank of New Zealand was held at 2 o’clock this afternoon, at the bank-ing-house, Queen-street. There was a crowded attendance. Mr George Buckley, President of the Board of Directors, occupied the chair. The Chairman said that in order to see that the meeting was properly constituted it would be necessary before business commenced to see that the requisite number of shares were represented by those present. Subsequently the Chairman said that it had just been reported to him that over 50,000 shares were represented, and they would, therefore, proceed with the meeting. ihe unanimous report of the Shareholders Committee was read by Mr Justico Gill‘6B, Chairman of the Committee, as follows : “Gentlemen, when at our last meeting you appointed us a Committee of Investigation into the affairs of the Bank, we natur ally felt that such an appointment implied a wide-spread anxiety on the part of shareholders to have independent assurances oa to the bank’s real position, an anxiety justified by recent circumstances in its history. Thanks to the provision of the Inspectorand the efficiency of the bank, staff, our work was facilitated, and we were soon able to assure ourselves of the soundness of the bank in respect of its ability to meet all its liabilities, a conviction which further examination confirmed ; but we, at the same time, found the position of things such as must be eminently unsatisfactory to the shareholders, and that we were face to face with circumstances which necessitated a somewhat enlarged interpretation of our commission and mature-' consideration of comprehensive measures in your interests, hence the' unavoidable delay in the presentation of our report and recommendations. Our examination disclosed a mass of securities taken in support of weak accounts, the value of which had fallen greatly, and many accounts were in liquidation, or which ought to be so, the cover for which had become obviously inadequate, involving losses wbich the Eirocbors hid not faced, but which, upon vigorous examination wo feel convinced will not only absorb the’whole of the reserve fund, but also nearly one-third of the paid-up capital, say, £BOO,OOO in all. The data supplied to us are of a clear and exhaustive character, amply authenticated; and after a minute and careful examination of the various accounts and assets, we are satisfied that under good management, and the judicious realisation of the securities, the amount named should cover all losses. You will naturally and properly expect from us something in elucidation of a state of things so startling, which we had so little right to expect. It is obvious to us that for years past the bank has been paying a rate of dividend which ought not to have been paid. Securities have been held and the account kept going in the vain hope of a recovery of the values placed upon them in what was in fact a period of inflation, and supervening upon this within the last two or three years heavy losses in Australia brought matters to a climax which we are now under the unpleasant necessity of facing. The principal Australian losses have been made in Sydney and Adelaide, where the selection of managers in each case was, to say the least, unfortunate. In Sydney, after a gambling career long known to most people, the manager was convicted of embezzling the bank fuuds ; and in Adelaide money appears to have beeD advanced, or rather squandered, in a way which can only be characterised as reckless and disastrous. North Island, N.Z.-In Auckland we regret to find that, though the head office of the bank is there, and its affairs are under the immediate eye of the Directors, the general character of much of the business carried on has been most objectionable, and the policy pursued open to grave censure. Inflated schemes, or proposals coming from or influenced by certain persons, appear to have met with ready supp’ort by lavish advances to companies and individuals without adequate security or warrantable prospect of advantage, or oven safety to the bank. Such advances not only account for more than half the whole loss now disclosed, but the securities held, being more or less unproductive, curtail the earning power of the bank ponding their realisation! South Island, New Zealand. —ln the South of New Zealand heavy losses in the past, incurred to a large extent through rash or dishonest management, have been, so far, previously written off and provided for ; but the securities, in themselves of sound enough character, have been held without adequate allowance for a fall in values, and the deficiency has now to be recognisod ; and finally we find that advances havo been made to some of the Directors upon insufficient security, and from these advances a heavy loss has arisen, estimated by us at over £160,000, while certain transactions have come under our notico calling for t-ie gravest censure, if not for more soec tic action. The connection between tiiu bank and the New Zealand Loan and Mercantile Agency Company, by the chief and other officials of the

bank acting for the Loan. Company and being interested in the working of both, has not for many reasons been advantageous to the bank, and should on no account be allowed to continue, as we consider the Com; pany has been by the bank as regards responsibility. For this state of tilings the Directors, as your nominees, entrusted with full power over nil the officials and the affairs of the bank, are no doubt primarily responsible, and beyond remarking that the real control of the bank's policy appears to havo been for many years in the hands of a limited circle, with which the late General Manager was intimately associated, we should probably have said no more on this head, but for the circumstance that, on application to that gentleman for an explanation of certain acoounts, he referred us to the Inspector, who. ho alleged had been de facto the General Manager for five yearo, i.e., since 1883. We have been at some pains to clear up this question, and are of opinion that Mr Murdoch's allegations aro not only unsupported by the bank records, but are distinctly negatived by the Board minutes and other evidence. Wo find further that, up to 1886, when the Holt frauds were brought to light by Mr Murray, Mr Murdoch was the only official from the head offioe of the bank who ever inspected or reported upon the branches in Australia, and that the effective control of that business, aswellasof the accountsinNewZealand, which caused the bulk of .the losses we now deplore, did not pass Murray till the bank’s money had been advanced and the evil virtually done. We think it is only due to him and the other senior officers to acknowledge their loyal adherence to the bank, end their efforts to conserve your interests under circumstances of very exceptional difficulty. Having now communicated to you the result of our -investigations, we have next to explain the measures which, upon Conference ...with the Directors, we think should- bp adopted to rehabilitate the bank. Considering how much a bank’s prosperity depends on its reports, and on the confidence reposed in it by its shareholders and the public, the necessity for a radical change in the administration and for an increase ..of the capital of our institution became immediately apparent to us, and we may here observe that,, through deaths and retirements, the Directorate and the chief management have Deen virtually already reconstituted. What we have further to say we ask yon to regard as the joint statement and recommendation of the Directors and ourselves. Somuchofthe capital having been lost, it must necessarily be written off, and the shares reduced from £lO to £7, paid up, otherwise no dividend could be paid till the amount lost had been replaced out of the future profits. This will leave the paid-up capital £700,000 and the reserve liability £1,000,000. We have obtained the advice of London counsel that this writing-off can be legally done, and you will be asked to give the requisite authority to apply for the statutory confirmation of this alteration, and for power to the Directors at their discretion to accept at some future time from shareholders, who may be willing to repay the £3 per share written off, thus reinstating their shares at the original paid-up amount without the increase of the reserve liability already attaching to the shares. The expediency of increasing the capital is so obvious that we need not occupy your time in discussing that point further than to say that it is not dne to the financial need of money, bub to.the necessity for an increased amount of capital sufficient to ensure the stability of the bank and confidence to its depositors. It is pro. posed to take authority to create 100,000 new shares, and to issue 50,000, which would make the paid-up capital £1,250,000, and reserve liability £1,500,000 ; and we are 'pleased to be able to announce that applications have" already Deen secured in London for 20,000 shares by firms and persons of the very highest financial standing, which not only insures the success of the operations, but gains for the Bank new connections which the Directors value highly and will do their utmost to strengthen. The applications could liave been secured for a larger number, if not, indeed, tho whole msue, but it has been deemed bettor to reserve at least one-half for the colonies. Probably 25,000 will be offered in Loudon at £1 premium, and 25,000 in the colouies at par. We may say that our conclusions as to what should be done, and how it Bhonld be done, have been arrived at after months of anxious consideration, and after consideration with the London Directors of the Bank, and with other persons there of high standing ; and in seeking your authority for what we propose, we ask you to bear in mind that wa are shareholders like yourselves, that your interests are our interests, aud that while the circumstances of the bank require decided and well considered action, it is. not desirable to discuss publicly tho details or the various considera tions wbich have led us to the conclusions now laid before you. We will only add that, notwithstanding the character of our report, we see no occasion for despondency about the future of the - bank, or to doubt that the shares you hold or those you may take up will be a good investment. Finally, as regards the bank, it should be borne in mind that the ordeal of such an investigation at a time of depression so extreme is one which would be trying to any institution. Other banks, now strong and prosperous, have had trying episodes in their history, and the trenchant character of our report may be taken as evidence that we have determined to face and disclose all the facts, for the goodwill of the bank’s business is of great value. It has m the past divided among its shareholders, over and above ten per cent dividends, sums which aggregate nearly double the amount of the capital we now find to be lost ; and while desiring to guard against the creation oi unduly inflated expectations, we are in a position to say, from the figures of the half-year ■just closed, that even now tho banks legitimate business is capable of yielding good dividends, notwithstanding the serious drawbacks under which it has of late been working When time has been given to enable the Directors to got rid of the unproductive assets, and to develop tho bank’s legitimate operations, still better results may be confidently expected. On its merits, therefore, the investment is one which ifc appears to us may bo expected to yield satisfactory re-

turns, and within a short period to command a considerable premium ; and it is to be observed that tho bank's business is by no means confined to New Zealand. In London there is a large aud valuable deposit conneo. tion and exchange business, from whioh, virtually, no losses are ever made. In Australia there is business of a strictly legitimate character represented by assets and liabilities aggregating over £3,000,01)0, and contributing a material proportion of the available profits to which we have alluded ; and even as regards New Zealand there is no inherent reason why it should not be as prosperous and wealthy as any other colony of the Australasian group. It is inferior to none of them in climate, fertility, or natural resources. In its borrowing proclivities, which have been the subject of so much adverse comment, ifc is not singular, and in so far as these have been excessively indulged in, that is but a passing incident in the national history, the temporary consequences of which have been fcoosharply brought home to the people of the Colony to permit of the lesson being soon forgotten.—We are gentlemen, yours faithfully, Thomas B. Gilltes, chairman; Geo. Buckley, W. H. Colbeck, John McLean. Auckland, October 3, 1838. The President moved—“ That the capital of the bank be increased to the extent of £1,000,000.by the creation of 100.000 further and additional shares of £lO each, and that the Board of Direotors be and are hereby empowered to issue, dispose of, and a110t25,000 shares, or so many of them as they see fit, on such terms and conditions, and payable at such time and either with or without premium, aB the Board of Directors may determine. Mr W. S. Wilson seconded tho motion. Mr Reader Wood said he understood that the first business of the meeting was the consideration of the report. Mr Justice Gillies explained that only the resolution to increase the capital of the bank would take effect at once, and nothing else that would be done at this meeting would be of a binding effect until a confirmatory meeting had been held, to be called a week hence.

Mr F. Cherry thought that it would not be just to the Committee to defer the consideration of the report withaut comment of some kind. The Chairman pointed out that at the next meeting other, resolutions with respect to the writing off of the capital would be proposed, and the report would come up for coufirmation at that meeting. The Chairman’s motion was unanimously adopted. The Chairman proposed—“ That clause IS of the Deed of Settlement be so that the same is hereby altered by omitting the words ‘ shall not ’ in tho last line of the said ciause, and substituting the word ‘ may ’ instead thereof.” The motion was seconded by Mr W. S. Wilson and adopted. The Rev Shirley W. Baker moved, “That Messrs George Buckley, William Henry Colbeck, and Frederick Nelson George being the only candidates for tho vacant seats at the Board of Directors, be declared duly elected.” Mr L. D. Nathan seconded the motion, which was adopted. Mr F. G. EwiDgton moved a hearty vote of thanks to the Committee for preparing the report. He thought there was real honesty about the report. At a time like this it was desirable that they should know the very worst state of things which had befallen the bank, and he considered the statement put before them showed that those gentlemen mußt have gone very carefully into the matter, and devoted a great deal of time and anxiety to it. Mr S. B. Browning seconded the motion, which was passed without dissent. Mr Justice Gillies acknowledged the vote. He might say that to Messrs Buckley and Colbeck principally were due the thanks of the shareholders, because they had devoted themselves almost continually from the time of their appointment up to the present time to the Inbour of the investigation. Mr Walter Johnston had also ;been of the very utmost service in London in the various arrangements and in obtaining the advice required. This concluded the business, and the chairman announced that a confirmatory meeting would bo held a week hence. (from our own correspondent.) Dunedin, October 3. The Bank of New Zealand report gave rise to much comment here. Opinions are diverse. Many of the business people are ot opinion, however, that the worst is now known, and express confidence that the bank has a satisfactory futuce before it. As showing this, business men offered to purchase shares after the result was known at £5 10s.