THE UNION BANK OF AUSTRALIA, LIMITED.

New Zealand Mail, Issue 1202, 15 March 1895, Page 17

THE UNION BANK OF AUSTRALIA, LIMITED.

(Froni the Money Market Review of February 2, 1895. )

Tho .'-half-yearly general meeting'of proprietors of this bank Avas held on Monday at thh offices, Bank Buildings, Lothbury, presidency of Mr John S. Hill, foi? .tl'ie purpose of receiving the report of iCthe directors, and of supplying the vacancy in t&g direction occasioned by the resignation Frederick Fanning, provisionally filled by Mr Charles Parbury, who offered' himself for election. Mr W. E. Mcwljurn (the manager) read the notice calling the meeting, and the report of directors and statement of account afei follows Avere taken as read “ The directors have to submit the annexed. balance - sheet of the Bank to August: 31 last, duly audited, which exhibit's a net amount of profits, inclusive of the “balance brought forward from the previous,half-year, of =£59,420 ss, admitting of a dividend at the rate of 0 per cent, per annum, eqtial to 15s per share, Avhich will •ibs.ol-b =£45,000, and leave =£14,420 5s to be ’carried forward. The directors liavei’aS< usual, carefully investigated the business of the Bank, and, as the depression in the colonies alluded to in previous -reports still continues, they hay© again made large reserves for doubtful dependencies. „ The directors have to report that the branch at Port Augusta, in South Australia, has been closed. The directors have, with much regret, to report the retirement from the board of tbeir esteemed colleague Major Frederick Fanning, whose services as a. local director in Sydney, an subsequently as a director in London, during a period of over 30 years, have been of much value to this institution. _ The vacancy' thus created has been provisionally accordance with the deed of settlement, by the appointment of Mr Charles Parbury, of East India Avenue, London, merchant, who was a director or the Batik from 1882 to 1892. Mr Parbury now offers himself for election. The divi-dend-warrants will be transmitted by post - ntr inst., and the dividend will be payable in the colonies' at such date as the general manager may fix after receipt of telegraphic advice. —By order of the Boat'd, W. ft. Mewbukn, Manager, 1, Bank Buildings, Lothbury, London, 19th January,' 1895.” vWe beg to report that we have verified the- cash; investments, bills of exchange and other assets in London, and have had access to thg_accounts sent to London fioni branches in the colonies, and ” having examined the same, and the books an I accounts of the London office, Ave are of opinion that the above balance-sheet is a full and fair balance-sheet, properly drawn up so as to exhibit a true and correct view of the state of the company s affairs as shown by the books of the com-pany-fv Fredk. Whinney •V- : Va.• ' (Chartered Accountant), " Albert Deacon, Auditors.

i’he Chairman saidlt is. always a pleasure to your directors to meet their fellow-shareholders and render to them an account of their' stewardship, but this 'pliasifref’jS' necessarily not an unalloyed one when, as on the present occasion, it becomes : our duty to submit to you accounts Showing largely reduced profits as compared with those to which you were formerlyaeeustomed. The causes of those reduced profits are not far to seek. They are thvbdt found in one paragraph in the rOpOrt and one item in the balance-sheet. The paragraph in the report is:—“As the depression in the colonies alluded to previous reports still continues, the directors have again made large reserves for doubtful debts, &cThe item’if} The balance-sheet is:—“Specie on hand-ancTcash balances, bullion on hand and 'ivniraAisitu, £4,578,462” My colleague who I ‘Occupied this chair twelve months ' a<*b drew your attention to this item, when it"stood at £4,000,000, and my immediate again did so, when it stood at £4,200,000. ; It has once more largely increased, and it represents a large sum over - and above that proportion of coin to liabilities which the most prudent banker considers^-necessary to retain., You are doubtless aware that in Australia each bank keeps its own reserve of coin. There areho means of employing this such as are operiutb bankers in England, and, consequently, an excess of coin, whilst it is an index M depression of trade, necessarily leads tb a large falling off in profits. In addition to this excess of coin in the colonies, we had money at call and short notice • in London £520,000, as compared with £265,500 six months previously, and £135,000 at the corresponding date last year, and, as all bankers know too well, this sum, too, has been earning unprecedently low rates of interest. My predecessors have spoken of the great recuperative powers of the Australian colonies, and the . admirable energy with which the colonists set to work to develop existing and Heyi* industries after the financial crisis of the spring of 1893. But, unhappily, they have had to contend with an ' altogether unexampled depreciation in the of their great staple of export, which, indeed, is not confined to the produce of Australia, but has affected simultaneously all the great producing countries of the world. Cotton, wool, wheat, sugar and iron are all at abnormally low prices, while the index number of Mr Sauerbeck’s valuable, statistics is for the month of December 60-1, the lowest on record. The result of this is necessarily a large contraction of trade, a diminished demand for money, increased competition amongst the banks' for the solid business that is offering, and consequently largely reduced rates for Advances, again seriously diminisning the profits of the Bank. This reduction of the advance rate is not to be deplored, as it helps to relieve the pressure on the trade and industry of the colonies, and thus tends to hasten the return to a period or

prosperity. As a consequence of this re- j duction in advance rates, the deposit rates , have also been largely reduced, and noiv > stand at abnormally low figures, viz., 3 per cent, in Victoria, Tasmania and South ! Australia, 3£ per cent, in New South j Wales, Queensland and New Zealand (excepting for the local banks in the latter Colony), whilst in West Australia alone the rate is maintained at per cent. This great reduction in deposit rates Avili tend to improve the future profits of the Bank, but will not be fully felt for twelve months, whilst the reduction in advance rates is immediate. I am aware that some shareholders have commented unfavourably upon the large expenses of the Bank as compared with its earnings. This subject was one of those which engaged the attention of the directors during Mr Finlavson’s recent visit to England, and a committee of directors has been specially appointed to consider the subject. But I should be misleading yuu if I told you that these expenses can be suddenly yery largely diminished. Reduction can only be gradually effected. One means of so doing is by | the closing of branches, for Ave are satis- : fied that our branches are not overstaffed, and this is a step Avhich must be taken with extreme caution; but in the last three half-years we haA r e reported the closing of eight branches, whilst only two new ones have been opened in the same period, viz., at Cue and Goolgardie, on the Western Australian goldfield, and at both of these we are doing a most satisfactory business. I may say that the ratio of expenses to the total figures - in the balance-sheet is ' slightly lower than formerly, whilst the average of colonial salaries has diminished by 10 per cent., and this diminution will progress as old officers retire and juniors are appointed at the reduced scale of salaries now in force. There is one other paragraph in the report to which I must refer, viz., the loss which the Bank has sustained by the retirement of Major Fanning, whose amiable qualities had endeared him to all his colleagues, whilst they had learnt to value his sound judgment and great experience in Australian affairs, Owing to a very serious failure of sight, Major Fanning had for some time been anxious to be relieved of the responsibilities of a director, and had only retained his seat at the express desire of his colleagues until they had found a suitable successor, and they esteem themselves most fortunate in having been able to secure the services of Mr Charles Parbury, who. for a period of ten years, from 1882 to 1892, had already proved himself a most efficient director of the Bank. The only other items in the balance-sheet , to which I need make any reference are deposits, .£16,794,428, as against £16,930,110, not so large a reduction as Ave should have been glad to see, as with large surplus funds/unemployed we have been desirous of reducing deposits wherever: we could do so without sacrificing connection; bills payable £2,385,794, against £3,173,108; and on the other side of the account bills receivable, loans and other securities at London office, £1,321,021, against £2,702,604 changes due to the season of the year, these items always standing much higher in February than in August. London leasehold premises stand net at £83,353, against £75,301, the difference being represented by a payment to .the contractor on account of our new building in Cornhill. It has, I believe, already been explained to the shareholders that we were constrained to seek another home, because after 1896 the lease of the premises in which we are assembled will become one at twelve months’ notice, and we were unable to obtain any satisfactory assurance that that notice would not be given at any time during the , next few years of our tenancy. This was a position which a great bank like ours could not assume. The total net cost, of the leasehold site and building Avili probably be from £120,000 to £125,000, and we reckon on receiving rents over and above the ground rent of £IOOO to £I2OO, and we save the rent of £2500 a year for the building in which we are now met, whilst we have, as I think you know, set aside a sum of £IO,OOO, which with accumulations at 3-2- per cent, interest will suffice, at the expiration of the lease in 1966, to extinguish the cost of the site and buildings. The shareholders will observe that the liability under the Baring guarantee has disappeared, and, whilst we think we acted wisely in joining almost all the large financial institutions of London in giving the guarantee, it is a satisfaction to us tha't, as was anticipated, it has entailed no loss, and I think the Bank of England is to be congratulated on their successful management of a very delicate undertaking. At our last meeting the shareholders had the advantage of hearing an 5 address from our valued general manager, Mr Finlayson, and will have been able to form their own opinion as to what manner of man he is. The directors cannot doubt that a free exchange of Adews between themselves and him will prove of much ultimate benefit to the Bank. He has resumed his arduous labours much refreshed, I hope and believe, by the comparative rest he enjoyed in this country, and we look forward with confidence to his doing all that is humanly possible to maintain the business and profits of the Bank under circfimstances of almost unparalleled difficulty. Our cordial thanks, are due not only to him but to Mr Macmullen, his efficient substitute during his absence, to Mr Tolhurst, the resident inspector in New Zealand, to the colonial branch managers and staff generally, also to our valued London manager, Mr Mewburn, whose devotion to the interests of the Bank cannot be too highly praised, to the able submanager, Mr Carbery, and to all the London staff. At the last meeting of shareholders, in July last, the chairman explained to you at length the unexpected position our claim against the liquidators of the late Bank of .South Australia had assumed in consequence of their refusal to

carry out their agreement with this Bank, dated April 11th, 1892. The liquidators persistently declined to act on the Judge’s repeated suggestion that they should join in the petition for liquidation under supervision of the Court, and in consequence the Judge was unable to grant the petition. Under these circumstances, this Bank, under counsel’s advice, submitted a petition for the compulsory winding-up of the late Bank of South Australia, and on the 6th of December, 1894, Mr Justice Vaughan Williams granted the compulsory order. 4t the same time he affirmed the liability of the shareholders of the Bank of South Australia for the debt to this Bank, and stated that in his opinion it was the right and duty of the liquidators to make the necessary calls. The shareholders of the Bank of South Australia have, however, given notice of appeal against this decision. The callable capital amounts to £BOO,OOO, in addition to which there is, we understand, unlimited liability in reI spect of the late Bank’s note circulation, ' about £90,000, and, further, this Bank holds a lien under the agreement of April 11, 1892, ovgr the excluded or B assets, on Avhich it is difficult to place a value. Assuming, -therefore, Mr Justice Vaughan Williams’ decision to be upheld in the Appeal Court, of which the directors entertain no doubt whatever, there should be abundant funds forthcoming to pay the just claims of this Bank in full. I now beg to move the adoption of the report and accounts. (Applause.)

Mr Sebag Montifiore seconded the resolution, and said that he could not say he rose on tha-t occasion with any great feeling of satisfaction, as there was no doubt that the feeling most prominent in all their minds was one of disappointment. It was, however, only fair to themselves, as well as to the gentlemen on the other side of the table, for him to allude to the crisis and very abnormal condition of the great staples which formed a large and important part of the trade of the Australian colonies, and which had led to the present position of affairs. He had watched very closely the condition of affairs in Australia, and although he was, as he had said, somewhat disappointed at the present result, yet he was sure that no shareholder present or absent would think of reproaching the managers or directors of the Bank —(hear, hear) —knowing that those gentlemen had not been wanting in wisdom or energy, but that they had been competing with a combination of circumstances over which they had positively no control. (Hear, hear.) He did not think that the balance-sheet need cause anything like despondency in the minds of the proprietors. It showed the very strong position of the Bank, and the remarks .of the chairman gave them a very large amount of hope and ment for the future. (Hear, hear.) In reply to a question, the Chairman said that the amount due from the Bank of South Australia was included as an asset, and, as he had already'stated, the directors were quite confident of obtaining payment of the amount. The resolution was then put and carried unanimously. On the motion of the Chairman, seconded by Mr It. J. Ashton, the re-election of the retiring director, Mr Parbury, Avas agreed to. The Manager (Mr Mewburn) having read l the dividend adveitisement, stating that the warrants would be sent out on the 30th instant, the proceedings terminated.