BANK OF NEW ZEALAND

NZ Truth, Issue 1078, 22 July 1926, Page 3

BANK OF NEW ZEALAND

Sound Scheme of A National Benefit

..-.., x (By "Fiat Lux.") , For years past the Bank of New Zealand's reserves, v both dis. closed and internal, have been regularly and materially strengthened from profits, until to-day the Bank stands m a remarkably sound position. • , I

TT is just this sound financial position which now makes it possible for this institution to undertake the nationally beneficial task of providing the farming: community m particular with long-term loans on the amortisation principle at a rate of interest (6 per cent.) which cannot fail to be entirely remunerative to the borrower.. Whether the business will prave equally satisfactory to the bank will depend principally upon the treatment meted out regarding income-tax upon this portion of its 1 earnings. , Of a' surety the Government should viey the case most sympathetically since the bank is virtually relieving the State of the embarrassing necessity of establishing agricultural banks; Viewing; t his '. "' :;; ."■' . ■.•./ : taxation point very broadly it seems to this writer that, even 'should the Government ' decide to forego / income,tax entirely on this b;ran eh of the 'bank's activities for: say, ,the first few years, the. . " State ,w o ul.d ultimately recoup itself; indirectly th r 6 ugh thye increased gen- '.. . era! prosperity of the Dominion induced by .greater production of -primary products. ■■'■•■-', The bank" proposes to finance -this long-term loan '■ branch by issuing hew special share capital to the extent of <£ 1*406,260 and raising debentures to the value of £4,218,760, as and when required. ■.■'"' " ■ • .-, This share capital will carry a fixed dividend of IVz per cent, and this return will be a charge, upon the whole of the bank's earnings . and not merely upon the returns from the long-term loan branch. • This fact m , itself will make these shares attractive to'investors who, -will thus be i*eceiving as big a re'tuxn for their Investnient as though they personal)y advanced their money actual mortgaged / ■■'■'] In addition they will have the Gib-raltar-like security of the whole of the

I CONSERVATIVE POLICY j |«»PHE Bank of New Zealand has | |" i^ enjoyed, a number of pros- § = perous years, but mindful, of its. I I trials of 1894 its directors have very | i wisely, pursued a most conserva- | i tive policy, particularly m the dis- 1 i tribution ' of dividends."— "Fiat | i Lux." ■'■-'■ ' ..,.-.. |

bank's assets behind, their investment m shares and are entirely relieved all the trouble attendant upon collecting interest and rearranging , the investment at say five yearly periods _ At first sight the bank's Proposal to pay 7% per cent, for money which It will lend out at 6 per cent, looks unsound and for the first few years the new department's activities may posisibly adversely affect; the ordinary shareholders' return. . .:.- However, with the enormous reserves of the institution all earning good profits this, possible result appears improbable to this critic: Another aspect which must have, a considerable bearing upon the future results of^ the bank's business is that by providing urgently required finance for primary producers the latter should; V • . be. able to increase • '•-■'' :t h ci r Production : and thus increase the general prosperity of the Dominion m which the i bank will naturally ! share. \ ' It has been I suggested m, I some quarters i that the. bank's I ordinary business i. will secure some collateral ad van-, tage from the iong-term loan branch. In the opinion of "Fiat Lux" this will prove to be the case. ...* Assuming the scheme is worked on a liberal basis regarding advances, it should prove o,f the utmost /benefit tp the Dominion, and the directors and officers of the bank are to be congratulated upon evolving what promises to be a real help to the country. Until the proposal has received Parliamentary endorsement, and details of the methods of working . the .new department are-made public.it is hot possible to guage with any degree of accuracy the support the new scheme< will meet with., ■ ,\^lt : is very certain, however, that , 'the bank will readily obtain all the /capital it can prudently utilize just .as soon as a call is made".