THE NATIONAL BANK OF NEW ZEALAND, LTD.

NZ Truth, Issue 889, 9 December 1922, Page 12

THE NATIONAL BANK OF NEW ZEALAND, LTD.

Forty- Ninth Annual Report and Balance-Sheet.

The above institution is now m Its fiftieth year, and It is the junior member m the group of banks conducting the business of exchange and banking m this country. Although it is a London bank, it has, ever since it commenced to trade m the dominion, confined- its operations to New Zealand and to London. In '■■ both cases it has done an exclusively New Zealand . trade. Lloyds Bank. Ltd., is a commanding shareholder m its make up, which also accounts for the deference paid by our Government to the "representations" which are so often made to it /by this hefty financial youth. For youth is the proper term to apply to a bank that has riot yet I turned fifty.. Nevertheless, the National has proved itself to be a worthy factor m the development of New Zealand. In the early days, when all of the banks were booming properties, .and advancing, m many cases 100 per cent, of the alleged values of these securities (?), this little concern "did its share of the business." and m due time, learned ' A VERY COSTLY LESSON via the medium of ' joint and several follies perpetrated along the lines of pur South Sea Bubble, of.whicn arose m tho board rooms of the 'banks themselves. However rotten the haulmanagement of the "eighties, and the early 'nineties was, tho fact remains, that many of the landed properties acquired through the over-liberal advances made by the banks, were brought into tho first stages of .development, and have since turned out to be the reservoirs, from which we are drawing boundless exportable wealth, and to which we look now for still greater supplies. It is- a fine thing to make mistakes, at times, for then cojne the logical results,. which teach us a better way, and after all, enable us to reach the rock bottom of common-sense. The last slump, just passed, has proved that the banks have not forgotten the errors of fifty '"years -ago. The National Bank of New Zealand, Ltd.) has given signal proof, on many recent occasions,, of its determination to help its customers with due, regard to prudential considerations, not only for itself, but for its clients as well. By adopting a policy so mutual m its application, a vast public service haa been rendered to the whole community, and which very properly, haa m the first instance, arisen m the confidential dealings of the bank and its clients. In this manner, a stable credit situation is achiev- ' CONFIDENCE IS ASSURED, and a generally, profitable atmosphere is maintained.. , During the%ear under notice, the. bank has increased its authorised' capital ltmit from £3.000,000 to £4,500,000, arid it has also emitted 100,000 new shares at a premium of £2 per share. By this operation the paidup capital of the bank will be £1,250,- --{ 000, and as the promia on these slia.'vi are to be placed to the reser,-3 l'uf ), 1 the latter will then reach nn equality with the paid-up capital. Tho reserve , fund is increased this year by the sum of £10,000 taken from the profits. While on this subject, some reference to this particular reserve fund may prove to bo of service to those interested m company finance. It has taken fifty years to build up tin? £1,350,000. and of the amount mentioned £513,000 represents sums set aside from earned profits, and the balance £737.000 comes from the prcmla attached to the various share Issues of tho .bank; In tho first case, the shareholders hafl to forego an amount of dividend which a more reckless kind of board might have declared on their shares. This may be called self-denial under a wise policy of duros:!, and for tin? sound no u:y the directors of the bank are to bo prnined. P.ank shareholders are a transient body of persons, who as a rule, demand huKO dividends on every possible occasion that arises; therefore, at times a bank board has to put <ip a big light TO PROTECT THE PROFITS iVoiri the greody desires of a speculating 1 proprietor*-- In the case of collecting uremia on every share Issue ihe board very properly applies tho funds, so acquired to strengthening the reserve fund. The larger the reserves nre the greater tho assurance for "tho conservation of the -paid-up cap-ala-nd for the future liability In respect of the uncalled capital of tho bank. This is most important In the case of a credit Institution like a bank. It should l)e Just as Important m tho case of every other form of joint stock enterprise. The point that "Cambist" wishes to make here is, that all forms of capital suffer from chronic waste. No matter how great the ascertained i profits of any company may bo, nV,U. iho chronic wasting of capital proceeds. The only euro for this nnmic.Ud disease is the ricorous reservation of .some of tho profits made at each | balancing. This is tantamount tp • «::iylntr that tho reserve Question. Is I more Important than the dividend ! problem at all times. And so It is. | Without resouveK It would be fnipo&- --[ sible to stand against the cftecta of :i wastage caused by bad debts, unprofitable v ans.'ietions, expensive compej tition. «nd many other matters whk-ii I are Inseparable from the economic j system under which we live. Once tli'.' pui»l;<- begin to .«eu>je how enjjJta] \v;isto», and how neeeii.viry and nauirnl Miirli :i process Is, then we may extent to find tho question of reserves taking THE FOREMOST PLACE In their considerations. No company Its really solvent which has not a reservo fund. In some way commensurate with its ago and capital. Without such a financial buttress to protect tho capital stock, tho whole faof]c. becomes n mere wall of sand uirnlnst the rnelns Ktorm of competition. Microbes Inside, and enumtts outside; paid-up capital soon dls&p. penra. Investors and Hharcho!der» m

all companies should m the first case, shun anything whiaii does not otter the security of a reserve fund for their cash, and m the latter case, oia and new companies should, all of them, start building or increasing reserves before ever a penny of dividend is distributed. The National Bank or New Zealand, Ltd., is m a splendid position when it can point to paid-up capital, and reserves m such fine balance, and at the back of it there is a glorious shadow of secret reserves, which even the bills payable vteoi (£1,622,070) and landed property, premises and furniture (£241,844) cannot altogether obscure. In a word, .security, for all. . Notes m "circulation have increased by £1,050,000 to £2.031,451, compared with the previous balance-sheet. Deposits and current accounts are Jess by £53,000 at £5,243,237. The movements just noticed have provided the bank with loanable capital to the extent of. £997,000. It will be seen from this how valuable is the note circulation to the bank. "Cambist" .would direct the attention of our e.'jctors to this, for ■ ■ ". IT PROVES THE FOLLY of allowing private enterprise to dabble with national currency. If a bank can manufacture, by means of- .the printing 1 press and a few bales of paper, over a million pounds worth of notes which "are not convertible and still remain legal tondei*,". why m the name of commonsense do we not have a State bank attending to this matter? This country could "wugh up" over sixty millions sterling m less than four years m order to whip the Huns, and to do this, it pledged its credit m the shape of printed paper bonds, which are, of course, interest bearing ••.urrency. Bank notes are free of interest, but the people who use thorn m the shape of overdrafts, exchange, etc., have to pay 7 per cent, per annum. Of course, the banks pay the note tax, but the State would not have to pay any taxation on its note issue. The latter could lend its notes and so obtain interest on the loans, which would, because of the amount on issue, have a larger circulation, and oarn more for the State than it receives from a note tax. The country needs this sort of currency to expand its production of natural wealth, and to help on the railroading and all other arterial communication which are urgently required at present. Everything is. hung up, because the banks have no money to lend, and none of them could ever flnancfe the needs of the country, for the country »s '.igge'r than the banks. Then why not let the State ■ USE ITS OWN CREDIT, .instead- of- pawning us all to the banks? Bills payable are £ 2,500,000 less at £1,622,070, which emphasises the fact that our imports are again ' falling into the proper proportions j of the country's requirements. The mercantile side of the slump — overimportation of goods — has been to a large extent .cured, through buying fi'om hand to mouth. This Has cut down the supply of drafts drawn on New Zealand, and at the same time, reduced the intermediary liabilities of the bank as a bill discounter m London." Turning to the assets side of the balance-sheet, all of the movements, with the exception of cash, money at call and bills receivable, also property end premises accounts, are m the direction of reduction. Coin is greater ! by £215.000 at £1,520,002. Investments arc less by £787,000 at £1.349,---483. Bills receivable are more- by £666,000 at £3,519,524, while advances have shrunk by £1,650,000 to £8,880,---231. Twelve months ago the total for Hie latter heading was £10,560,000. This shows- how solid is the monetary position of New Zealand borrowers. It pi-oves that the Dominion provides a safe and happy hunting ground for those who desire the fat fourteen per cent, dividend: the choice morsels which build up a, bulging reserve fund; an atmosphere ambient with enormous potentialities, which becomes disturbed at times by THE RAUCOUS NOISES of ignorant politicians. We are, indeed, a wealthy country. The National Bank of New Zealand. Ltd., -hould know it, from past and present experience. Let it be hoped that the Steat Lloyds Bank, Ltd., which is a ilg partner In this Institution, will become alive to the fact, too. Taking a glance at the profit and loss account, it la found that tho gross profits at *£ 59G.000 show a reduction ot £ 49,000 when compared with the previous balance-sheet. The gross profits on this occasion are given as £595.---304, whife the net profits are sot down it £212,726. In the latter case, the not results are £114,000 loss than m ihe previous year. Is this a sign that the National has been hard hit by the | slump, or is it evidence that the well '>f profitable banking has been sounded to its depths? The answer to both questions, is m the negative. The real facts are, that the bank has been making a huge reserve for impossible had debts; that It has been writing off losses which have aborted themselves through the incoming wave of prosperity; m fact, that the spirit of wise precaution has been exploited to the full. The grand bank, has adopted -.nd put into practice the motto— 1 -:'f"t.y first" — and to which must bo added, ! SAFETY ALL THE TIME. The balance-sheet proves that the iliarcH m. this bank are cheap at £6 Mild, and that £7 1h :i bettor appraisement thnn the market quotation. The Hou. William Pcmber Reeves, author of the Arlbtrution Act In force m this country, is chairman of tho b:\nk. His address to tho shareholders is well worth publication, but there Js not room hero, to do more than notice ,\ point or two. In It. With regard to labor conflicts, ho Justly claims that N'pw Zealand has been blessed by an absence of that kind of trouble, it is mostly on account of the beneficial Act which sprung from his brain, that we are so happily placed. At the moment of writing the country is perturbed by the unsocial actions of the seamen. Those fine fellows, who did so much fo^ us all during tho war li.nvp fallen under the spell of men, whoso ethics are mostly dishonest to the lust degree; . ignorant of every form of social duty; stilish beyond llie power of im.'ig'.mttion. <\\{ of this comes from disregard of tho laws of 'he country; the llouting of the Arbitration Act In particular. The lattor is a special law for tha poor num. It was put on th*. Statute Hook by thu Liberal- Labor Party. Through the Arbitration Court machlnoiy. A JUST BALANCE Is .struck for the observance of both employers and employees. For thotlr.it time In many yours, the worker* tivo .-iskfetl to work on lowvr wages, ami Uhreduction m wri^roß is remarkably uniall. Tho Socialists who havo »K>on chased <n>t of their native countries, ami who nave been allowed to penetrate into <)W free political lnslittilkin.s, ami into the labor movement, :m; now .>ndeavoring to raise serious njrlfo m this Dominion, and arc turning tin; acumen Into law-breakers. n« a first step towards a general uphivwul. Now Zealand won"t have the Bed Plug of Continental Imbecility. "Cambist" would deport every agitator; labor, capitalist, prohibitionist, out of New Zealand. These persons pet "too good n hearing" Ju thiH country. "If a m«n will not work, neither ahnll ho cat." that 1» the motto of St. Paul, and lit? waa th© Ruccwjuor of the true Socialist, "who had not where to lay his hem!." Tho One who really workcl, and wenried Himself, for the koo'J of n)\. The influence «f the lirini; unrt'V ttotice Huo frouij. ( htit "C;»tnbi:t " :*<■■(>«'.< the f"K*.'t<! oftic;- will yol hv «;st:tbli:-. l t«-ti ill \V*'ith,,-;tOf!. Tlie n<-\v xouvt."*! nvn:u:<r !••* n hi;th l>p<- o' iiia.ii. I:t •i!k Ir.ut'l <• the tt;i:isrio(io?vi of lite b;«:il-;. i wilt \><^ i-.cjit fire from »n«*fi i;.' ;*<>:"*lul . cnuMdei :i!!nti;:, ;!•)<! n jmt i'i'^;ni»<l for i)..> . ..mi,., nit v'>i kou<J i-s l;i:«'!y to be ill?) iii;>in fh.'slic.