BANK OF NEW ZEALAND

Otago Witness, Issue 2856, 9 December 1908, Page 37

BANK OF NEW ZEALAND

HALF-YEARLY MEETING. A BRIGHTER OUTLOOK. WELLINGTON, December 4. The half-yearly meeting of shareholders in the Bank of New Zealand was held to-day. Mr Beauchamp, chairman of directors, said : As is customary at half-yearly meetings, no statement of accounts will be presented. s In this connection I am pleased to be able to inform you that the profits of the bank for the six months ended 30th September last are exceedingly satisfactory, and there is every reason to anticipate that the current financial year •will compave favourably with any of its predecessors. From the recently-published banking returns for the September quarter you will have noticed that the combined advances and discounts of the banks transacting business in the Dominion are the highest on record, these being .at September 30, 1908, £21,217,959 as compared with £18,498,184 on the same date of last year, an increase of £2,719,775. During the year ended September 30, 1908, private deposits decreased by £1,344,995 and Government deposits ■by £887,193, making a total •change of £4,951,963. These figures are unquestionably significant, but I think that" they need not occasion anxiety as to the future. The altered relations between the banks and their customers are brought about by the sudden and unexpected fall in the values of wool and other primary products. Whilst high, I may almost cay phenomenal, prices were ruling for wool, etc., there was a large margin between the income and the expenditure of producers, and this enabled them to carry on operations without leaning unduly on the banks or other financial institutions, and simultaneously prompted many farmers to increase their holdings of land (much of it being purchased on easy- terms) at prices based upon the assumption that the fat years would continue indefinitely. The prosperity of the country districts, being naturally reflected in the towns and cities, similarly affected urban and suburban land values, encouraged many wholesale and retail firms to trade beyond their means, and gave rife to considerable extravagance in living. With the cessation of speculation in land, the reduction o' imports (which cannot be brought about suddenly) the curtailing of credit, and more economy in private expenditure our financial equilibrium ere long will be restored. " .

Owing to seasonable weather the prospects of the agriculturalists and pastoralists leave little to be desired. The country never looked better than it does to-day. There is a strong demand for butter and cheese at highly remunerative rates, and I shall be Surprised if the exports under these headings do not touch £2,500,000 before the close of the present season. • Further, it is gratifying to notice that, compared with the prices ruling a few months ago, there has quite lately been a marked improvement in the values of all descriptions of wool in Europe, Australia, and New Zealand. If the present prices for wool be maintained they will materially assist in lessening the monetary stringency, which has been" felt throughout the Dominion during the past six months. We can scarcely look for a recovery in the prices of hemp, kauri gum, pelts, or frozen meat until trade revives in Great Britain and America. Under the heading of frozen meat I must exclude South Island lamb, for which there is an excellent demand at remunerative rates. With a bountiful harvest in America and the election of a President who is pledged to carry on the settled policy of the great republic, it is expected that we shall quickly see a ■wonderful revival of industrial activity in that country. This movement, I believe, has already""commenced. Many of you no doubt noticed a press telegram which appeared in the ?apers a few weeks ago, dated from New ork shortly after the presidential election, announcing that at several of the freat industrial American centres — Pittsurg, Boston, Chicago, and St. Louis — there were undoubted signs of returning prosperity. I hope and believe that the improvement in the American industrial conditions, the commencement of which was - the -j reported, will lead the way to a general revival, which will untimately have its effect in improved prices for the staple products of the Dominion. AVith regard to Great Britain, our best customer, I recently read an able article in a leading financial paper entitled "The Business Outlook," where the -writer, after describing the unsatisfactory social and economic conditions now obtaining in that country, concluded by saying : "The question is whether this world-wide depression has touched bottom or whether a lower deep has still to be found before a real, if slow and gradual, recovery starts once more. We are inclined to think that though the depression may become more active in some branches of trade, yet in others recovery has already commenced. Given time and peace, cheap money, cheap food, and cheap raw materials will always bring prosperity. Some symptoms of improvement are perhaps already visible. The prospects of a fine harvest in India are certainly encouraging for Lancashire, and there are some who believe that the ■cheapening of material has already given ■a stimulus to the consumption of woollens 'and worsteds." This cheering forecast/ we nave every reason to hope, is proving well founded. It will be within .your recollection that the Prime Minister of England, speaking at the Guildhall banquet on the 9th ult., is reported to have said, when referring to the existing trade depression in the Old Country, that he was sanguine enough regarding the future, provided that the peace of the world was maintained. He believed there were signs to indicate that the setback in industrial activity would not be of long duration^ />nd he cited figures to

support his view. This time last year the Bank of England rate was 7 per cent., while to-day it is 2£ per cent. Money in London is a drug in the market. Day-to-day loans have been available at from i to f per cent, and 1 per cent, the charge for a week, whilst the working rate for three months' bilJs had been 1 7-16 th per cent. In spite of these unusual monetary conditions, it is still hard to float loans on account of public bodies, the reason being that the British public is at present shy of such investments, and there is a large amount of undigested issues in the hands of underwriting syndicates and stockbrokers. Until these are absorbed by the public the public bodies in this Dominion cannot expect to receive much encouragement in London. I refer to this because several times of late the question has been raised as to why, with the Bank of England rate standing at 2£ per cent, and money in ample supply, several of our harbour boards and municipalities have experienced difficulty in respect to their loans.

Having regard to the steady growth of all branches of , trade and commerce in New Zealand, and the amount of money that is required for the legitimate development of our resources) 1 believe that the time is not far distant when it will be desirable to take into consideration the question of increasing the capital of the bank, and thus bring it more into line with the other banks represented in the Dominion. Ido not propose to deal with this subject to-day. For the position of director there were two candidates — Mr William Watson (who has been a member of the board since 1894) and Mr Herbert Pearson Rawson. This being the first contested election since the by-laws for the election of directors in terms of " The Bank of New Zealand Act, 1903" were brought into force, a ballot of shareholders was taken in terms of that enactment. -The returning officer reported the result of the election as f ollowb : — Mr Watson, 55,334 votes ; Mr Rawson, 4074 ; — majority for Mr Watson, 51,260; informal, 2186. Mr Watson was therefore re-elected for a further period of two years. Out of the profits of the bank for the East half-year of the financial year the oard declared an interim dividend of 4 per cent, on both preference and ordinary shares. The dividend will be payable to shareholders in Wellington on Monday next and at branches on receipt of advice.

In returning thanks for his re-election to the directorate, Mr Watson remarked : '"In writing to me many shareholders have alluded to the present dividends being so poor a return on the money paid in, and have urged that the position of the bank now warrants a fairer distribution. Some have pressed for a portion of the lost capital being replaced out of profits, and others have suggested calls or fresh issues of capital at par, and a few have expressed themselves as satisfied with the augmentation of the reserve fund. Now, while it is reasonable that well-to-do shareholders are satisfied to see the bank increase its resources by way of the reserve fund, the intrinsic value of the shares being thereby increased, it must be borne in mind that many depend on dividends for a means of living, and with them it is a case of hope deferred making the heart sick, for they have waited a very long time. I indicated my own opinion on this subject on June 26 last when speaking in this room. I said that if we were able to pay increased dividends as well as add substantially to the reserve fund at the end of the present financial year I should advocate it, and subsequent events have not caused me to change my view. The other aspects relative to the matters raised in the shareholders' letters I cannot do more than touch upon just now, as they have not yet been considered by the board, and the time is not opportune to discuss them at this meeting. I fear that but few of the general public understand the exact position of the ordinary shareholders in the Bank of New Zealand or the equities of their case. Many companies, like individuals, have lost money in times of adversity, and have suffered writing down capital, which in subsequent prosperity has been restored. It is an axiom that labour goes to form capital, but sometimes the process is reversed, as. it must be admitted that the bulk of the money lost by this bank many years ago went directly and indirectly to pay for labour, and some of it even now swells the deposits in the savings banks. Many a shareholder worked hard for the money originally invented in our shares. That money and more with it, to the extent altogether of £13 6s 8d per share, went toward other labour, and now that, after a long time, the investment has become profitable, the original labourer, or his ivpre.<-entative, should surely derive the long deferred benefits, whether by dividends and the issue of new shares at par or otherwise.

Mr M. Kennedy said that on one or two occasions he had indicated that his own preference would be for an increase of dividends at no distant date. He had never asked for an increase hitherto, though he made it clear that he did not think an increase should be long deferred. The capital was divided into preference and ordinary shares. It was a peculiar anomaly that the smaller interests, so far as capital was concerned, had control of the dividends, consequently, no matter what he might say, unless he could get the other shareholders to agree with him it would be useless to discues the subject that day. No one would contest the maintenance of a strong reserve, but- at one time it was urged that if a reserve of £100,000 could be set aside it would be satisfactory, but £200,000 was to be set aside. It was, accordingly, urged that dividends should not be increased by 5 per cent. The facts, he submitted, indicated that there was some control which did not appear on the surface. The board was unanimous on all points affecting the bank' 6 future, and he hoped the time was not far distant when the difference on the

point he had mentioned would disappear. He was of opinion that the directors representing the shareholders on the board had a right to take the shareholders into their confidence on this question, and that attitude he would maintain. Now he wished to say that they would be asking in the near future for an increase of dividends. Some people in Parliament might raise their hands in holy horror. He contended that for the purpose of dividends the share capital had to be stated at a million and a-hali (not one million, taking account of the half-million wiped out), and on that basi3 the dividends paid amounted to only 5 per cent. Technically this could not be done or shown in the balance sheet, but it represented the true position. He concluded by stating that he hoped, no matter what might be thought by one or two members of Parliament, that the board would be independent. — ("Hear, hear.")

Mr T. S. Weston referred to live possibility in the near future the question of increasing the capital of the' Bank of New Zealand coming before the board. 'Speaking as a shareholder, and a large one, lie would like to have the assurance that any scheme brought forward would be submitted to the shareholders in order that they might have the most ample and the fullest opportunity of considering how that scheme affected their interests. He would point out how the value of shares depended greatly on the details of such a scheme. The supporters of the bank recognised that one of the factors that made the shares in the bank so valuable was the small amount of paid-up capital. Any scheme by which the capital of the bank had to be increased would be most important to the shareholders. Tli3 majority on the board had no share in the bank, perhaps rightly so, as representing the Government, and had consequently only a limited interest in the bank. It wag only fair, therefore, that the shareholders should have every opportunity of considering a scheme to increase the capital. They did not want a repetition of what took place in 1903, when a measure affecting the whole of their interests was hurried through in a few days, without considering its bearing on the future of the bank.

The Chairman, in reply, dealt with the question of the relative positions of the Government and the shareholders. So far ac he was concerned he considered that Mr Kennedy had put the relationship in a light that was scarcely fair. Although the Government held only £500,000 prefeajfcee shares in the amount of paid-up capital, it also held a guarantee of £1,000,000 in the direction of the liability of the Dominion, and was, therefore, interested to the extent of £1,500,000. It was impossible to get away from tho question of repayment in 1914. Until the guarantee was extinguished the Government had a right to be represented on the board to the amount of the guarantee plus the amount of 6hare capital which it held. Mr Beauchamp complimented the representative^ of the shareholders on their pertinacity in putting the views of shareholders before the board, and alluded to the general unanimity between trip shareholders and the nominees of the Government. He thought it was somewhat premature at the present time to deal with the scheme mentioned by Mr Weston. He would say, however, that whenever any scheme considered by the directors should be brought down with the object of benefiting the bank .is a whole it would be proper to consult both the holders of preference shares and the holders of ordinary shares.

A vote of thanks was accorded the staff and the chairman.