BANK OF NEW SOUTH WALES.

Otago Daily Times, Issue 21266, 21 February 1931, Page 20

BANK OF NEW SOUTH WALES.

PAYMENT OF DIVIDENDS. RESOLUTION OF PROTEST. (Special to Daily Times.) WELLINGTON, February 20. A resolution strongly protesting against the decision of the directors of the Bank of New South Wales to pay dividends in Australian currency was carried to-day at a meeting convened by the Wellington Stock Exchange, and attended by some 50 shareholders. The chairman of the Stock Exchange (Mr E. Bucholz) said that similar meetings of protest were to be held at Auckland, Christchurch, and Dunedin. Mr 6. • Shirtcliffe, who was voted to the chair, said they were glad to have present Mr R. C. Addison, resident inspector of the Bank of New South Wales. Mr Shirtcliffe did not doubt that the directors of the bank were guided by the best legal advice obtainable when making their recent announcement that in future dividends would be payable in Australian euri’ency, but whatever the legal position might be he felt somewhat strongly that the New’ Zealand shareholders' had a real grievance against the directors, and that the . latter had by their announcement impaired the heretofore high reputation of the bank for fair and square dealing. The bank had. a total shareholders’ list of 8980, of which about 1600, or rather less than one-fifth of the total, were domiciled in New Zealand. The paid-up capital amounted to £7,500,000. and the reserve fund to £6,150,000, making a total of shareholders’ funds of £13,650,000. The average number of shares held by individuals over the whole number was 42, but owing to the relatively large number of very small shareholders in New Zealand the siverage shares held by each individual in this country was round about 30. Assuming this figure to be approximately correct, there were 48,000 £2O, fully-paid shares representing £960,000 of paid-up capital held by New Zealand shareholders. This New Zealand capital investment carries with it, of course, its proportion of the rserve fund, say, roughly, £785,000, so that on the paid-up capital and reserve fund together the New Zealand shareholders’ proportion was £1,745,000,0r rather more than one-eighth of the whole, The bank’s total deposits at September 30 last were £66,238,000, of which the New Zealand deposits amounted to £6,315,000, or. roughly, one-tenth. The total advances and discounts were £60,400,000. New Zealand’s proportion was £9,125,000, or, roughly,' one-tenth, so that the New Zealand proportions were, roughly, one-fifth of the total number .of shareholders, rather more than one-eighth of the total capital and reserve fund, and about onetenth of the total business of the bank. It might therefore be said that in proportion to the whole the New Zealand business was obtained from and by reason of the New Zealand capital investment. This led up to the very reasonable contention that the Bank of New South Wales, as regards its New Zealand business, was domiciled in New Zealand, and this was borne .out by the fact that the New Zealand shareholders were on the New Zealand register. It further followed that as the profit earned in New Zealand was really earned by the New Zealand capital the dividends accruing from those profits should be paid in New Zealand without deduction. It was also a fair presumption that, during recent years, at any rate, the New Zealand percentage of profit on the volume of business done had been greater than, that earned in Australia,, and if that were correct it emphasised his view that a great injustice was being done to New Zealand shareholders ip forcing them to contribute to the general funds of the bank over 18 per cent, of their own dividends. He understood that the directors’ contention was the dividends being declared in Sydney must be paid in Australian currency, or, in other words, the payments must be subject to the present exchange rate of £lB 12s 6d per cent, discount. He suggested that this exchange rate was a purely arbitrary one, based, not upon the trade balance between the two countries, but upon the financial needs of Australia, and bad been imposed for the sole purpose of preventing Australian fluids drifting through New Zealand to London, and by that means increasing the already, heavy obligations of the banks' to provide funds in London for the Federal and State Governments oversea commitments. This was borne out by the fact that while the bank’s New Zealand buying rate on Australia was nominally £lB 2s 6d per cent, premium, they had liberty to work down to £5 per cent, premium, which clearly showed that the opinion of some of the banks at any rate was that the present heavy exchange rates were not justified by the balance of trade between tha two countries. For the reasons therefore that the Bank of New South Wales, as regards its New Zealand capital and business, was really domiciled here, and that the exchange rate was' a purely arbitrary one, fixed to safeguard the bank's funds in Australia, he contended that it was very difficult for the directors effectively to turn down the New Zealand shareholders’ request that dividends should be pafid to New Zealand without deduction. He had yet to learn that the Bank of New South Wales £ note in New Zealand would go any further than the same note in Australia, and therefore to ask New Zealand shareholders to accept £Bl 7s 6d, as against the Australian shareholders’ £IOO, was to inflict a very great injustice upon shareholders in this country. On the basis of a 9 per cent, dividend, equal to £86,400 on the New Zealand capital, it would involve a penalty against shareholders in this, country of no less than £10,092 per annum. He suggested emphatically that New Zealand shareholders were not asking for any more per unit of their holdings than the Australian shareholders received, the internal value of the £ being practically the same in both countries. He therefore moved—-“ That this meeting of Wellington shareholders of the Bank of New South Wales,strongly protests against the action of the directors in their proposal to pay future dividends in Australian ■ currency, their reasons being: (1) The Bank of New South Wales is, as regards its New Zealand capital and business, really domiciled in New Zealand; (2) the profits made from its New Zealand business would be available for the payment of the quarterly dividends without any deduction; (3) the deduction of the present arbitrary exchange rate of £lB 12s 6d per cent, would inflict upon New Zealand shareholders a grave injustice, involving them collectively in no less a penalty than £16,092 per annum, based on a 9 per cent, dividend and the present rate of exchange.” In conclusion, he suggested that if the directors could not see their way to meet the wishes of the New Zealand shareholders, then they should be asked to send the warrants for the full amount of the dividends to the New Zealand shareholders, leaving the latter to make their own arrangements for exchange. A motion on these lines was discussed at length, and defeated almost unanimously, it being felt that the shareholders should press the main point.