THE BANK OF NEW ZEALAND.

Otago Witness, Issue 3510, 21 June 1921, Page 58

THE BANK OF NEW ZEALAND.

ANNUAL MEETING. THE CHAIRMAN’S SPEECH. (Per United Press Association.) WELLINGTON, June 17. The annual meeting of the Bank of New Zealand was held to-day. Mr Harold Beauchamp, chairman of directors, presided Tho Chairman, in moving the adoption of the report ar.d balance sheet, said that as copies of the report and balance sheet have been circulated among tho shareholder, he would proceed to comment on the figures, giving explanation of the various items. In tho course of his ex planation he said: Reserve for taxes, £426,0C0; increase, £B*.OCO. The increase in this amount, so far as the dominion taxation is concerned, is entirely due to the employment of funds in New Zealand where income tax paid by the banks boars no relation to tho profits made. Banks are taxed arbitrarily on the total of their assets and liabilities, and for the past year our payment of income tax in New Zealand repfesents 14s 8d in the £ on our New Zealand profits. • The amount which wo paid in taxation during the year now under review was as follows:—Income Tax .. .. .. £306,051 7 0 Land Tax .. .. .. 17.559 3 0 Tax on Note Circulation .. 152,533 10 6 Pates .. .. .. .. 8,945 19 0 £185,094 19 6 Turning to the other side of the balance sheet, the principal assets are:— Coin and cash balances at bankers, Government notes, legal tender notes, and bullion, £6.685.733; decrease, £2.086.547. Money at short call, securities, and bills receivable in London, £3,324,356; decrease, £11,959.285. The decreases in these two sets of figures have resulted from the same cause. The requirements of our importing customers, who have had to make unusually heavy payments for goods brought into the dominion, and the increased advances to which I shall refer more fully later on, have brought about this considerable reduction in our London funds held at short call, and have also caused ns to draw upon the large balances which were held with our London bankers a year ago. Our investments in London were written down io their market value at the balance date. Since that time they have appreciated in value, and are new werh more than the figure at which they stand in our books. Investments in the dominion, £3.513.102; Australian Government securities, £399 316: total, £3,912,418. Decrease, ' £151.662! These are shown in the balance sheet at their market value, except in a few cases where there :s no public quotation. In such cases the securities have been written down to a figure at which they would yield such a return as buvers now expect. Bills discounted. £2.780.753; increase £1,279.520. Other advances, £27.725 874 • increase. £9.796.259. The considerable increase in these figures will be explained later on. Landed nroperty, etc.. £337.463; decrease, £23.640. We have again appropriated tho sum of £59.000 from the vcir’s nrofits in reduction of this item, although there is a very large margin of value in the assets by which it is represented. PROFIT AND LOSS. Tile net piofits, you will notioe, amounted to over £726,900. During the past year we have had the full earning power of the £500,00;' of new capital furnished by the calling up of tho balaneo of the old ordinary d'tre capital of £3 6s 8d per share; also the benefit of unusual exchange rata*. ° Fur’her, our large investments in London, which amounted at the beginning of tho iu vjvor £20 > {XX).000, and remained in tie neighbourhood of that amount for tv first six months of the year, yielded la.ndsc.ine returns. Hie carry for.vnrj ’ has been increased fcy i-4i4.75g. As a large portion cf .ho j-esrs profit* were represented by exchange, derived from tho excessive importation of goods, and as wo may look forward to a corresponding '.eduction in irnnorts this year and next, it has been thought proper to provide in. this manner for the expected failing off in future exchange profits. ADVANCES. Our advances i:i New Zealand have increased during the period under review hv no less a sum than £IO, SCO,COO. Tin's result arises from assistance given to our customers, and caused by:--(u) Excessive importations; (b) very much lower prices for, and uoii-rca'isntiou of a large portion of. the dominion s wool clip and its output of meat; (ri lower prices for other blit less important exports'; (d) subscriptions to tho Discharged Soldiers’ Settlement Loan of £6,000,000. v. inch was offered locally by the Government in November last; "(e) income tax pavments. i RouuTliv soeakin.r £2,000.000 „f the increase in our advanefs is caused by this item alone.) As far as is consistent with the painmount obligation of a bank to maintain adequate reserves for the protection of its depositors, wo have felt it to be our duty to our borrowing customers to stand by them in the existing stringent monetary conditions to the utmost extent which our resources Mould permit. Our advances arc most carefully watched by your directors and by the executive, who are fully alive to the fact that, in times of uncertain markets and falling values, unceasing vigilance and tho exercise of one’s best judgment are c.ssrni ial to avoid loss, not only to tiie bank, but to its customers also. Importers and other traders have I <■ n obliged to ci ine to us for accommodation far in excess of their usual requirements. Although imports still continue at a higher figure than is desirable, orders in most lincsj have been reduced to small proportions, and you may he sure that we shall do our best to see that no further orders are placed until the present inflated stocks leave gone into consumption. The other banks, we understand, are acting in a similar manner. It may, therefore, be expected that it will only be a matter of months before tho overdrafts of importing firms will commence to ::m down steadily, and that, before long, our advances to them will have come back to more normal figures, f believe that trailers generally now realise

the necessity for reducing prices and facing losses, in order to restore the equilibrium. In the conditions which have existed during recent months we have naturally had to extend increased facilities to those of our customers who are engaged in the sheep and cattle industries. Their receipts have fallen far below expectation, and those who bought land at high prices and are heavily mortgaged will experience considerable difficulty in carrying on. Fortunately, there is a general disposition to face the position with courago and equanaimity, and we may hope that, with industry and strict economy, the position will be gradually retrieved. The holding of more land than the owner’s capital warrants —much of which iias been purchased within recent times at inflated prices and with borro’wed money—is the principal cause of the financial difficulties in which many farmers are now involved. Despite the warning given by those most competent to form an opinion, the long period of almost uninterrupted prosperity, which until a few months ago the dominion had enjoyed, lulled the great majority of the public into the belief that continuance of exceptionally high prices for our primary products could still be looked for. A rude awakening hats now come, and, although there are bound to be a number of farmers and business men incapab’e cf meeting their financial engagements, these will be but a small percentage of the whole, as the dominion has never been in a better position to stand the strain of lean year* During these years of high prices for our principal products your directors and your executive have never been persuaded that these would continue permanently, and, consequently, that it was justifiable to base the value of the land upon such an expected permanency of high prices. In our lending, therefore, we have to a large extent disregarded what were considered to be current prices for farm land. Me have for some years anticipated that the aftermath of the war would bo followed bv a serious reduction in the realisable values both of land and of goods, and that this, in alj probability, would mean losses to traders and farmers, which might in turn have an effect upon our business. Me have, therefore, during past years taken such precautions as now enable us to face present conditions with equanimity. EXCHANGE. In the speech which was read to you on my behalf at the half-yearly meeting in December last, I referred to the difficulty in effecting remittances from Australasia to Great Britain and other parts of the world, which was at that time attracting considerable attention on tho part of the community and the press. During the six months which has since elapsed," this difficulty has not materially decreased. M bile traders generally have made great efforts to reduce the amount of the imports which have to be paid for in the shape of London or other exchange, goods have continued to arrive in very large quantities, and representing very high values, so that, for the first three months of this year —viz., January, February, March, 1921. the total imports amounted to £15,658,502. Imports are now falling off, and doubtless before long the demand for London exchange will have come back to reasonable figures. When our last meeting was he’d, telegraphic exchange on London was being sold by the banks at the unusually high premium of £2 10s per cent., a figure which it had not reached for something like 30 years. Some weeks later, the increasing demand for such remittances necessitated the rate being raised to £3 per cent, premium, at which it still stall das. It is a pleasure to be able to repeat that, after another six months of extreme pressure, we are still able to supply all our customers with the full amount of their requirements in the diape of exchange, either te'egraphic or by draft. It is interesting to note that, to meet the requirements of this dominion, tho bank has dratwn no less than 16 millions from London during the past 12 months. It is fortunate for all concerned that it had such large sums available in the world’s centre. As you will see by the balance sheet, the funds which wo hold in London, although much reduced, are still of substantial amount, and we have every reason to expect that we shall be able to continue to meet our customers’ requirements in the matter of exchange until conditions become normal ar.d the quesren of external exchange ceases to attract the attention and to cause the interest which have attached to it during the past eight or nine months. Business people in New Zealand generally seem to regard the payment of such a premium as £3 for telegraphic exchange as something somewhat remarkable. ' It is unusual in the experience of this dominion, and also of Australia, with which we are so closely associated, but this is because, as ! was pointed out six months ago, it has j nh.vavs been the practice of hanks doing i business here to hold large available funds j both in London and in the dominions, so j that they were always able to meet, the | requirements of the business community, j whether in tho way of buying or selling Such fluctuations m have taken place in j our exchange with Britain during the part j few months are, however, nothing extra - | ordbiarv. a.s compared with the fluctuations I during the past rear in the rates of ex 1 change between Britain and other countries: j indeed, they are trivial. The premium on | telegraphic exchange rose during tho year i from il to 3 m r cent.—a fluctuation of 2 i per cent. Dur’ng the same year—l99o the exchange between London and Paris | "is ns low 40 or > francs r"r £. and. as i Ugh as 63.50 —a difference of 67 per cent. i I tie exchange between London and Am- | sterdam varied to the extent of 32 per cent.: that, with Buenos Aires. 44 per I cent. : Bio. 91 per cent. ; Yokohama.. 26 i rcr cent ; Borne. 11l pel- cent. ; and Now j Yo-k 95 r cent. With there illustrations of fiuefuet : ons before them. : t seems to me that business ne.onlp in Now Zealand should rather fro] thankful for the s!-.hii:(y to whmh they are accustomed, and which st'T continues, than fee] concerned over the eompnrai ivelv smr.ll premium whVh has now to be paid for exchange on T ondon. While on the sulrie-t. it i.s perhaps appropriate that, T should refer to an aspect of our commercial dealings w : fh the outride world, and r .peria]J v w : ih Britain, with wlroh Ivy far the larger portion of our trade is done, which perhaps has not occurred to some of von. Whero two countries have trade relations with one another, each exporting to and importing from the other, it might ho expect od thii each of these countries should find the monrv for financing one side of the trail- which is in transit, but we in New Zealand, to a very large extent,

find the funds for financing both 041- exports and our imports. During the past levy 3 ears this* -has not been entirely the case. The greater part of our exports have, as you are aware, been bought by the Imperial Government, and have been paid for a'most as soon as they were in the hands of the Imperial Supplies Department, regardless of the tune winch might elapse before they were shipped and before they arrives in Britain. Hut this was a departure from the ordinary practice, which is now being reverted to. Our wool, our meat, and our other staple products are not usually paid for until they have arrived at their destination, or until they have been ecme time there. For most of our products the exporter here draws upon the importer abroad, probably at 69 days’ sight. Jibe bills havo not to be paid until the pt educe has been received by the purchaser, has probably been distributed, and possibly consumed. It is quite true that much of our produce is bought hero by representatives of the importing firms abroad, and that they have credits established by -tneir bankers under which the r drafts are drawn, but-, oven though these credits exist, it is the funds of our dominion banks which are expended, and Iho.y are not recouped until the bids mature. , *\s to our imports, tile converse position Holds. With regard to by far the larger part of t!ie goods which we inmort the funds to pay for them are supplied from ,\ew Zealand sources when the goods leave Britain. In some cases our importing firms have their own representatives in London whom they supply, by telegraphic transfer or otherwise, with money to pay for their imports. _ In other cases credits are c-stab--1 shed with the London offices of the banks which do business in the dominion, and these banks purchase from the shippers, or from their bankers, the drafts which they draw upon the importers here. In still other cases the exporters in Britain or their bankers coma to our London offices with such drafts, and they are purchased without the support of a credit from this end. , It is perfectly true that in many cases the importer .of tho goods will not have to pay for them until 60 or 90 or 120 days after the goods have reached New Zealand, but it is not the English exporter or the English banker who is meanwhile standing out of the money. Whichever of the methods which I have described is adopted for making the remittances to London, tne exporter there receives his money with promptness, and it is New Zealand funds already in the hands of the New Zealand banks, which are employed during tho period which elapses between the negotiaben of the bid and its ultimate payment. , -there are, of course, some cases in which tiro draft drawn upon the importer in Neiv Zealand is sent hither for collection and remittance of proceeds, but this process is not the usual one* Sneaking generally, we ourselves as a f community "find the money to pay for our imports as soon as they are shipped, while we wait for the proceeds of. our exports until they have reached their destination, or perhaps gone into consumption. It is hardly surprising that, under the present conditions, when imports have been arriving in unprecedented volume, and our products are nearly all fetching low prices, some difficulty should be experienced in continuing to make payment for the imports in the 6ame prompt mariner as formerly. It is probable that some importers are, at the present time, obtaining a measure of credit from the manufacturers or merchants who supply them, but the course of dealing which I have described is that under which by far the greater part of our trade is carried on. STAFF. To commemorate the sixtieth anniversary of the bank, which occurs this year, and rn view of the high cost of living, the members of the staff have been granted during tne year bonuses aggregating more than £60.000, special provision being made for married men drawing less than £425 per annum, who received bonuses amounting to 25 per cent, of their pay. Salaries and allowances have also been revised on a liberal basis, as wo feci sure that it is your desire that our employees should receive adequate remuneration. Last year I mentioned that the board had decided upon a scale of pay for our younger men —that, is, for those whose period of service has not. exceeded 10 years. It will interest you to learn that no fewer than 21 per cent, of the young men of those .roars are now receiving more than the scale rate of pay.' We also offered special inducements to the members of the staff to study for the diploma of banking, for the granting of which arrangements have been 'made by the Bank Officers' Guild with the University of New Zealand. A bonus of 10 per cent, has also been paid to those of the bank's pensioners who are drawing less than £350 per annum pension, and to certain widows -and other dependents of deceased officers. Before closing my .remarks about our staff, I should like to express, on behalf of my fellow-directors and myself, our warm appreciation of the service which has been rendered to the bank during the past year by its staff in Now Zealand, London, and other places where we are represented. The last six months has been a very anxious time for the general manager and the chief executive officers, as well as for the branch managers and other senior officers, and they have not spared them selves, but have given the closest and most unremitting attention to the bank's interests. Mr R. W. Kane seconded the motion for the adoption of the report and balance sheet. Dr Prendergast Knight said the impression existed outside the bank that; the Government had made a big concession to the bank and its shareholders. There was but one occasion when the bank went to the Government for assistance; that was during its crisis; but for the. new legislation something had to be given to the Government. What it was should be made public. He warmly .commended tho policy of the bank in splitting up its shares into £1 shares. If had made the bank of a much more democratic character now that the holding of its shares was so widespread. Air Jackson (Nelson) wished to know how the bank’s reserve funds were invested in London. In reply to questions, the chairman said the hoard would not be justified in saying what the company would be likely to pay in the future, which was so clouded with uncertainty The bank had great earning powers, and possibly the shareholders might, look forward to an increase in the divi (lend.

Mr Beauchamp referred to the provisions if the arrangements with the Government

as to fresh capital. The question had never been considered by the board at all, and would certainly never be considered at a time like this. It might mean to-day that shareholders would have to come to the bank for money for their shares if they wanted to increase their holding.—(Laughter.) To-day the bank only held one consignment of goods pending payment, and on that lie felt sure there would be no loss. In regard to the amount carried forward, tho idea was to carry forward a sum equal to a year's dividend. — (“Hear, hear.”) The idea was to have a sufficient sum to pay a dividend next year. Tie was glad the demoeratisation of chares had caused them to he widely distributed from one end of the dominion to the other This should be the “people’s bank,” and the prospects were hopeful in that direction. —("Hear, hear,” and applause.) He hoped some day that shareholders who during one period of the bank’s existence had foregone a dividend for nine years might receive an increase in their dividend to compensate them for past sacrifices. Replying to Mr Jackson, the chairman said the whole of the bank’s reserve fund was invested in British Government securities, the particular -security selected for tho purpose being 5| per cent. Exchequer bonds of short currency. “In addition to these Exchequer bonds, representing the reserve fund, we hold amongst the securities in London, which are shown in our balance sheet, further Exchequer bonds' to the amount of £1,000,000. It may be of interest to shareholders if I add that these two parcels of Exchequer bends were worth, at market price on March 31 last. £40,000 more than the amount at which they stood in our books.” The report and balance sheet were then adopted. Votes of thanks wore passed to the directors and staff not only for the past year's success, but for the way in which the bank had been brought through troublous times in years gone by. In reply the chairman thanked the shareholders very sincerely for their expression of confidence in the board and staff. It was the desire of ihe board of directors to mike the service as attractive as possible io the youth of tho dominion. They desired to have a fair proportion of graduates on the staff, as in other countries, such as Canada and the United States, where he had found on a recent visit, quite a largo number cf graduates from such universities as Harvard and M’Gil! and others in the service of banks and other commercial institutions. The board would be very pleased to place on the staff register any bright, young fellows who had matriculated, and when they became officers of the bank an effort would fc© made to give them reasonable leave of absence to pursue their studies at the university, and, on their taking a degree and coming back to the bank service, they would draw a salary to which they would have been entitled, or perhaps slightly higher, if they had continued in the bank as active members of the staff. Mr Beauchamp mentioned an instance already of a very promising young officer who was studying at. the university at Sydnev with a view to taking the degree of bachelor of commerce. The board wanted to encourage such studies, and such students might look forward to a successful career in the service of tho bank.—(Applause.) This concluded tho nroceeclings.