THE COMMERCIAL BANK OF AUSTRALIA, LTD.

NZ Truth, Issue 890, 16 December 1922, Page 12

THE COMMERCIAL BANK OF AUSTRALIA, LTD.

Fifty-Sixth Annual Report and Balance* Sheet.

The Btlgma of tho 'Nineties Removed.

The stigma of tho 'nineties which for all these years has been brandod on tho above bank Is at last removed, and for the future; lt lt bo hoped that never again' will this expansive institution doacond to tho unsound banking practices imposed ' upon lt. Tho Commercial Bank of Australia, Ltd., on tho day when it liquidated tho Special Assets Trust Co., L.td„ "washed nil its nlns nway" and now stands forth as probably v thoroughly cleaned up nnd substantial banking connorn. Tho Special Assets Trust Co.. Ltd., took over and nursed, or liquidated, all the wreckage that was left over from tho failuru of tho old bank after the capital account had boon straightened out. by writing down tho ordinaries and settling with depositors by iho iasuo of preference shares bearing: 4 per cent, interest. Tho fact that tho Special Assets Trust has faded, into oblivion, unablo to contribute anything to reinstate the lost capital of this bank, Js proof enough of THE DIRE CONDITION Into which tho advances made m tho' late 'olghtloa and early 'nlnotlos had landed the whole concern. "Cambist" had for years past hoped that when the final liquidation of the Trust took place that.n largo sum of money would be refunded to the bank as tlv accumulations of profitable realisations of assets maths from time to time. Hut nothing of tho kind has happened. The fact Is that tho whole of the crwdlt. If there 1« any credit to be claimed In this affair, rests on tho careful manasaxnont exhibited by the bank itself.

For nearly thirty years the bank has been using its earnings to pay the small preference interest on that class of its shares, and with the surplus left over it has been filling the huge gap made by wilting securities m the Trust Co. This writer is glad to see the ordinary shareholders coming into their own again. He it was who first, of all the financial writers 'in Australasia, urged upon the management of this bank the need for raising fresh capital and for the total extinguishment bf the Assets Trust Co. This wise policy slowly came to be adopted, the movement no doubt being retarded by the poor condition of the Special Assets Trust Co., Ltd. Now- we find that there is an infusion of fresh ordinary capital appearing m the bal-ance-sheet. This capital was obtained at a premium of ten shillings per share, but, alas, all of that premium has had to be HANDED OVER to the decrepit Special Assets Trust Co., Ltd. However, the bank finished up with a paid capital of £2,453,942 at end of June last, of which £2,117,---350 is m preference shares of £10, each bearing 4 per cent, preference interest and the remainder m ordinary shares (10s) amounting to £336,592. The latter class of shares are not yet all fully paid up, but the registered capital of the bank is now £3,351,527, so we may be sure that the last-men-tioned sum will be quickly reached, as there Is manifest need for all of the I registered capital, and much more besides. The bank has extended over a wide banking territory, as it is In evidence at no less than 353 places m the Commonwealth and New Zealand. It is competing against Institutions having capital resources running from £6,000,000 to £15,000,000 of their own proprietorship besides other capital assets amounting to many millions sterling. The day for small banks at this end of the world has gone by. Capital, and yet more capital, is the cry on every hand, not only for banking but for every other purpose where associated capital is needed. Owing to the lamentable condition of the Assets Trust this bank has not a penny of reserve to point to. Alltof the paid up capital is, therefore, left naked against the biting winds which blow across the field of business. But this is a condition that will soon be remedied, for, as before mentioned., the bank has cleared away all of the dry ->t and financial disease which up till now ate into its bones. There, are BIG PROFITS IN SIGHT, which, if wisely conserved, will be ample to provide a sturdy growing crop of reserved profits and make this institution level up to the standard df Its competitors in' these respects. No bank or any other kind of business' can be passed as strictly sound unless It can point tb a decent reserve fund. To carry out this principle, shareholders must exercise their patience and be content with small dividends. Bills payable, £1,104,774 (Including reserves for contingencies) is so small a sum that one is not overimpressed by the bracketed phrase. It looks as if the "reserves" are mostly for current purposes, and that is another way of saying that there is next .to nothing to provide for. The total sum of deposits held at date of tho balance-sheet is £16,187,721. The sum is sufficiently large to indicate the very excellent credit the .bank enjoys, and that the bank is mindful of the care needed tie protect these funds by careful use is>et out m the fact that only £10,559,092 stands for bills discounted and other advances. The bank is not lending to its customers at the same rate that it is borrowing from its depositors. The note circulation is £59,088, and as all of this item depends upon the circulation the bank obtains m this ' Dominion, we get ONE OF THE EFFECTS following a State note issue. Irt Australia none of the private enterprise banks can issue notes themselves. That privilege was taken from thetn when the Government established the Commonwealth Bank. The latter institution issues the soundest paper currency ot any Dominion under the British flag, and lt has benefited the whole Commonwealth enormously accordingly. On the assets side of the balancesheet the amount of liquid assets Is moat impressive. The total of these items is no less than £8,105,570, or just one-half of the sums held on deposit. This appears to be an ultracautious position, for to attain it the bank has had to keep out of profitable earnings a large proportion of the sums entrusted to it by its depositing 'clients. Now that the so-called depression has passed away and that trading is once again a normal functioning instead of a mad profiteering gamble, these large accretions of liquid funds will be let out to help on sober enterprise. The three following Items, namely, advances under Government wheat scheme (£39,924), Government war gratuity scheme (£328,400), and war loan advances (£367,523) are SO SMALL AND SAFE that no further comment Is needed. Bank premises, £529,445, stands for the bank's properties account. It seems a very small sum when one considers the large number of branches which this bank carries on In the pursuit of business. So small is the amount under this heading that "Cambist" is inclined to consider that there is a possibility of a considerable secret reserve In this item. Rut there may bo nothing of the kind, for In the profit and loss account the sum of £102,400 stands for "rent and other charges." Rented premises certainly have their advantages m other directions than the liberation of money which might otherwise be sunk In land and buildings. It Is time enough to own promises when the time shows that a district has evolved Into a permanent centre of business. These young States are dotted over with decayed townships, and m many of them are disused banking premises of older days. Ah, the early days, the roaring times, when settlement was on the move! Gold, wheat, wool, coal and all other things which these . countries abound m have been tried out ln various districts, but it was only whero success was achieved that - real centres of population developod and have remained permanent. The profit and loss account shows that the hank is carrying on a HIGHLY PROFITABLE BUSINESS. For the year covered by tho accounts now under notice, the sum of £648,002 is quoted as the net earnings of the bank. On tho other hand the expenses disbursed In earning tho Income are very heavy. This was to bo expected owing to the widespread field covered by tho network ,of branches and agencies which the bank maintains. Salaries and allowances come to ,£317,581. Rent and other charged (JCJ02.400) mitkc botweun them a total of £419.981, or, say. £1133 por branch <353 branches). Treating tho Income m tho same manner, that is. per branch, the income Is £1835 for each unit. Tho difference between tho income and outgo Is, roughly, thon, £700 per branch. Here we get an example of the smallness of banking profits. Tho Socialists who mouth about hugo banking profits only misload tho unthinking public when on this topic. Tho fact is that the Individual kerns of banking profits arc far smaller than that of any other form of business enterprise. When, as m this case, after the <>x non «««»*■ *>*•« inducted from tho not Income, only £228.050 remains as the year's profits to bo distributed, there is really nothing wonderful about that nchlevmont. To arrive at the successful conclusion of a strenuous year's business over twenty million pounds sterling had to be carefully handled In order that a little over 1 por cent, of not profit could be gnthcred m. Tho Russian pleader who tells his Ignorant audience that this bank has rnado £G-t8,062 per annum, or that Bomo other bank ha* exploited tho publle for bo much more or less. Is far from tho actual facts of the case. !

Banking is the MOST DELICATE BUSINESS m the whole gamut of credit. The downfull of any bank is . a terrible injury to the monetary fabric. "Cambist" is a strong advocate of the State Bank. The latter is necessary for the stabilising of the currency of all these States and for the protection of every private banking- enterprise at work m the same radius. Instead of destroying the present economic system everything possible should be done to make it stronger and better. When the banks suspended m the 'eighties the whole of Australia and New Zealand became involved m a monetary crisis which swept men out of employment, reduced values of all kinds of property, impoverished persons depending upon the income of investments made during earlier prosperous times. Soup kitchens and relief works had tp be organised to keep the workers from starvation. It would be well for the I.W.W. mob, who have taken charge of the workers' unions to be reminded of the foregoing facts, for when the very foundations of capitalistic enterprise — the banks — are shaken, it is THE WORKERS WHO SUFFER MOST. All of the banks are aiding developments which benefit industry of every kind. ■ The first crop of benefits falls to those who do the work. The worker "comes m" before a penny reaches the capitalist. The tanker gets the smallest share of all. The Commercial Bank ot Australia, Ltd., has twelve branches m this country. It evidently has found out that this is a land 'tfith great prospects ahead of it. Since these accounts prove that it holds nearly six millions of unused funds the time must be approaching when a portion of this credit will be made available here for borrowing clients. Unless that be the case the use of this bank to the community will be of a very restricted character. The securities offering m the Dominion for banking attention stand higher than those of the same class m any other part of the world. "Cambist" hopes that now the way is clear the bank will do Its duty to our people.. The slump has "gone west" so far as New Zealand is concerned.