Bank of New South Wales.

NZ Truth, Issue 470, 20 June 1914, Page 2

Bank of New South Wales.

One Hundred and Twenty -Seventh I Report. Sound Banking Breeds Confidence. The Greatest Balance- Sheet on Record. The above heading is not over-stat-ing the facts, as the figures amply prove. Supplementing the balancesheet, is the report of the Chairman of Directors, the Hon. Charles K. Mackellar, Kt., M.L.C. Both documents are precise and terse, and, to a great extent, models of what is due to proprietors and public alike. The chairman does not stuff his remarks full of stale newspaper clippings, or political balderdash, as does the chairman of the quasi Ttate bank m this land of financial foolery. The Bank of NewSouth Wales is a genuine colonial concern, bred, born and managed from Sydney. It had its share of tne troubles m past years, but meeting these m fine, plucky spirit, overcame them all. To-day this bank can point to a history extending over no less than ninety-seven years, and can truly say it has been the financial nurse and foster-mother of many interests which now make up a great part of the accumulated wealth of Australasia. It has never had to rush to any Government for salvation from Its own business sins. . When it has found a line of policy detrimental to sound banking, it. has itself cured the cause. Thus people of sense and good judgment have come to regard the opinions of its chairman, or its chief manager, as worthy of credence and regard. The immense public benefit which this is to those communities where the bank does business cannot be expressed m money values; but it is, nevertheless) A FACTOR OF TREMENDOUS ' WEIGHT., This humble scribe welcomes the straightforward, gentleman-like words of the men who so ably conduct the affairs of the "Wales," and who set so fine an example for others to follow. Before noticing the salient features of the balance-sheet, or commenting upon the report, it will be well to notice that the total figures, debit and credit, of the balance-sheet is no less than £50,854,720. This is a total that no other Australasian bank has reached. There are probably not half-a-dozen banks throughout the world with a bigger showing of assets and liabilities. Great as is this record, it is not a hundredth , part of Australasia's potential wealth. The surface has' only been scratched. The bank has practically only associated itself with primary productions calling for the most elementary abilities, such as the pastoral and agricultural industries. There is the era of manufacture yet to be . When the banks begin to cater for the latter, Australia and New Zealand will become a vast United States, "and these young countries reach a nationhood surpassing those of older and colder climes. Notes In circulation only total £277,874, the bulk of which are m New 'Zealand, yet the item is loss than the last balance. The Commonwealth Bank has taken on the job of issuing paper money on the other side, so the private enterprise banks will soon be out of that business. Writer hopes that the public will wake up TO THE' USES OF PAPER MONEY, and the first to lead the way will be the Australian giant we are now concerned with. Deposits are £36,699,815, an increase of £2,185.000 for six months. This shows that money is growing 'm all the States. The bulk of the increase is m the free deposits, or current accounts, on which tho bank pays no interest. This branch of banking never appeals to the writer's sense of justic n nor does he consider it good business for tho bank. So much free money is an incitement to speculation which does not always prove beneficial. Moreover, it practically compels tho bank to hold, ever ready, many millions of pounds. In tho case of this bank, over twelve and a-half million pounds has to rust m its vaults, and a large amount is placed In liquid securities which bring m very small returns. Of course, the £6,000.---000 which are m bills receivable m London, return a handsome profit, but, taking all m all, tho figures go to tnako it clear that tho public who have to deposit, should receive more consideration than they do. Bills payable and other liabilities total £6.739.876— a small decrease of £157,000, quite a casual matter m such a largo turnover as tho major figures disclose. The capital of tho bank 1b now the full £3,500,000, while Its reserve now stands at £2,450,000. Practically tho two items make up together Just six million golden sovereigns. This gives a position of strength that should satisfy anyono who believes In "trusting to riches." As to the correct ratio to be maintained between capital and deposits, somo amateurs on tho financial press say that £6 of deposits to each £1 of capital is the correct ratio, but this is fallacious. There is no such thing aa a ratio In credit to capital, but THERE ARE VERY SOLID PRINCIPLES as regards tho use of credit (m this case deposits). German bankers have advanced moro m this respect than English. Tho former have found out thut it la safe to accopt and use In wealth producing channels £10 ot deposits as against each £1 of capital. But Interest is allowed on the deposits and charged on all advances. The wisdom of this i~ made plain by the enormous strides Germany has made m tho last forty years. Wo see a great mercantile marine built up, aa well aa a navy, whllo industries of every kind have cono ahead with leaps and bounds. This lino Australian bank ought to emulate tho German Institutions. U would keep tho rust and moths off many sovereigns now mouldering m idleness m its vaults. Tho coin and cash balances aro nearly two millions greater this half year than last; but thut only reflects tho Increase m the deposits — a sum that m itself could flnanco onortnous undertakings. Monoy at short call m London haa gono up £235,000 as a result of tho moro rapid maturity of tho season's wool bills, owing to tho hot demand for tho fleece, and tho buyers taking their rebates on tha drafts. Tho investment* m Brl'Jsn and other ntocka aro about £100,000 less. Tho bank him boon soiling long-dated stocks, with a view to replacement m loans ot short dates. Tho bank docs not tako any risk la these matters that can bo avoided. They already sco signs tuat will mako it necessary soon TO LHT THE MONEY OUT In it» natlvo country. Bills rocoivablo are £700,000 greater, which ohowa how exports have grown— moro than 10. per cent, lttcrtta»e on the season. "CambUt" hoH already drawn attention to tho largo holdings of coin nnd liquid asficUi, viz., £2-1,215,000. Tho chairman mentions that tho Increase under this heading is £2.000,000. Ho admit* tho Intercut earned In thin department Ih on tho nmult side, but ho tempera his regret by ituying that a largo part l» doing duty an "a high ratio of cosh reserves." Tho most carping critic cannot but admit that tho position is admirable boyoml all manner of doubt, a* things ko. Two thins* stand out which ijmml remedy: TM«» overborrowInir by tho Oovcrnnwnlit of thefift £tutc#, and tin? Inability of tho bonkx to ush* th«* f-normoua fumta whlrh they hold for tho puUllr. This hank having tho Men's share of clcpoaitn. shows up thaavUn to a nicety. .Writer- would;

like to hear General-Manager J. Russell French on the subject, for there is no man sounder on finance m these States. Advances, loans and discounts produce the striking total of £24,892,406. In spite of the pulling m of advances during the year, the decrease is only £550,000. Yet it made the people squeal. Nevertheless, the bank has not been hard on its customers. The check was but a gentle rap over the knuckles to remind its customers they were working on borrowed money, and must* needs go a little slower. Otherwise these favored people might have thought they owned the bank, and started running amok. This is the kind of banking that matters. It is a beautiful blend of BRAINS, HEART AND COMMON SENSE.' Bank premises stand at £780,000 for no less than 340 branches. This works out at £2300 per branch; but, of course, such an average gives no idea of the true position. This item is very much undervalued. There have been big writings off. and possibly the true values run into double the. figures shownl In .other words, a large secret reserve is here snugged away, which adds further strength to the already strong. The bank makes big profits — real profits.. Careful analysis of the accounts for a series of years makes this a matter of certainty. One of the reasons for the growing power and strength of the Bank of New South Wales conies from this outstanding fact. It confines its dividends to a maximum of 10 per cent., Therefore, its reserves grow almost as fast as the capital account Moat of the banking failures m Australia and New Zealand have been traceable to the greed of shareholders. The Bank of New Zealand ,, went rotten on big dividends, and it, is now paying much higher dividends than this concern. The public should watch the greed of shareholders, quite as much as the bad management, of which greed is the root cause. Banking profits are like wine. They take some years to mature. It iB easy enough to make wine, but time pots the finishing touch upon the product Therefore, sound bankers, wuen they are let have their way, prefer to make a small dividend for safety sake. This bank can pay its 10 per cent, m quarterly instalments, which makes the investment m its stock very attractive to the fortunate shareholders. A continuance of tho splendid management of this bank will, no doubt bring about an Increased dividend. It will come as a matter of sound policy, from the accumulated profits, real profits that is. The way to reach which is clear to those who know how. "Cambist" sincerely hopes taat the Wales" will extend its business m New Zealand. We have a fertile country, which only requires to be taken from tho grip of the land grabber and put to closer settlement This will make our exports grow, develop our, local industries, and provide a safe outlet for the energies of the finest Australian bank hero.