COMPANY PROGRESS.

Otago Witness, Issue 3885, 28 August 1928, Page 29

COMPANY PROGRESS.

THE COMMERCIAL BANKING COMPANY OF SYDNEY, LTD.

The past financial year is of special interest as it comprised the first complete 12 months’ working since the amalgamation with the Bank of Victoria. The prior year included the first six months of the united concern’s career, and was able to show a solid advance. Those who looked for even better results in 1926-27 have not been disappointed. The net profit of £653,243 is nearly £lOO,OOO higher than that of its predecessor and almost £170,000 higher than that of 1925-26, the last complete financial year before the amalgamation. The rate of return on the capital employed has regained its old position, and while the 10 per cent, dividend is maintained, the balance retained in the business has grown larger with the larger capital. Of the £180,031 remaining to be dealt with, £125.000 has been allocated to reserve fund, while £50,000 is devoted to writing down the fixed assets. Thus a sum of just over £5OOO goes to swell the unallotted surplus.

The fixed assets have dropped to £1,357.143 or some £/0,000. When allowance is made for the £50,000 written off alter June, 1927, there has apparently been some realisation of property after the normal annual allowance for extension is considered. One effect of the amalgamation may have been to dispense with certain premises in the few places where both institutions previously operated. The sum of £50,000 allotted out of the past season s profits, representing about 3} per cent, on the total book figure, had not taken effect when the above valuation was made, and will cause a further reduction, but capital expenditure in the near future was indicated by the chairman at the recent ordinary general meeting. All things considered, the chief group on each side of the balance sheet has varied remarkably little. In neither case, however, is the heading restricted to the one item deposits being included with other liabilities,” while bills discounted are coupled with “other debts.” Ad\ ances to customers do not appear to be specifically mentioned, but, on the assumption that they are the largest asset it seems strange that they are submerged under the title of “other debts.” Placing the two groups opposite one another gives the following relations, viz.:

The slight difference during the past year is to the advantage of the deposit group. Looking, however, to the relative positions, it would seem that that group possessed a fair amount in “ other liabilities. Consequently the difference recorded may not be the effect of increased deposits. Bills in circulation, at £2,149,049, absorb practically the balance of the liabilities. A fluctuating sum, they doubtless serve as some indication of the general trend of banking business. Compared with the bills receivable group on the other side, they are considerably under one-half. Notes in circulation involve an indebtedness of £14,244 or practically the same as a year ago. The aggregate stands in sharp contrast to the notes and bills of other banks, which form an asset of £375,691. With little apparent accession of funds from deposits, much variation in the more liquid assets is not to be expected. Coin bullion. Commonwealth notes, and cash at bankers has fallen to £8,805,256, but part of the amount has found its way into short-time investments. These comprise £3,680,000, the bulk consisting of British Treasury bills. The larger holding in that form may be an indication ot an expected demand. The more permanent investments amount to £6,576 852 divided between Government and “other securities.” It is perhaps regrettable that a more definite designation is not given for the general investments, especially when they are grouped with Government securities as the proportion of the holdings in Government stocks is not indicated.

There has been comparatively little addition to the paid-up capital during the year, with the result that reserve fund by its latest increment has gained upon it. Since 1921 reserve fund has stood to the paid-up capital at each closing date as under, viz.:-—

The fact that during six years, while the paid-up capital has increased by 58 per cent., the reserve fund’s relation has not sunk lower than 77.67 per cent, and is now as high as ever it has been, speaks well for the prudent policy adopted by the bank. Shareholders may be justified in looking forward to a participation in this prosperity in the near future

THE UNION BANK OF AUSTRALIA LTD.

* Six months’ trading only, i” Free of United Kingdom income tax. As the paid-up capital has been increased by £500,000 during the year, some

increase in the net profit was to be moked for, although it is too soon for che full effect of the extra capital to be telt. The profit has advanced £11,540, but the advance has been more th<?.n counterbalanced by the extra dividend to be met. The customary 15 per cent has been distributed, and in this connection the new capital has ranked for the second six months, although it was not in circulation for the entire period. A com parison of the allocation cf the surplus for the past five years gives the following figures, viz.: —

I* or the latest year, the proportion handed to shareholders would seem to be excessive. In the circumstances, however, an equitable comparison with preceding years is not possible, and it will be necessary to wait and see what the current season brings forth. The effect of the issue of fresh capital is clearly visible on the balance sheet. As the capital brought with it a premium of 120 per cent., an extra £1,100.000 was at the bank’s disposal. Investments in gilt-edged securities have been swelled by the amount of the premium which, on the ether side, is credited to reserve fund. The total sum placed in British and Australian Government municipal securities is £2,863,062, the revenue from whieJi must contribute materially to the profit. It is somewhat unusual to find shillings and pence introduced into that valuation. Other investments consist of those that are short-dated which, at £760,000, are little oyer one-fourth of the other. Evidently it is not anticipated that realisation on an extensive scale is likely to take place in the near future. The greatest difference is found to be in the bills receivable group, which is up to £8,144,108, but is still lower than it was a few years ago. The tendency for money to accumulate in London is apparently again making itself felt. Another evidence of the larger funds available is the increase in specie on hand and cash balances to £7,311.929, or a higher figure than they have shown hitherto. The chief cause of the larger funds available is found by a comparison of deposits with the bills discounted, loans, etc., group. After a steady movement upwards for a few years, the latter group has dropped, while the former is able to show an equivalent rise. Approximately, a sum of £2,900,000 is added to the bank’s resources, which, whether it may be satisfactory from the bank’s point of view’, speaks well for the position of the community in general. Deposits stand almost at their record total of three years ago, the relative position with the borrowings having altered considerably for the better during the past 12 months, as the appended columns show, viz.:—-

The general group among the liabilities is down by over a million pounds—whether by the depletion of its reserves, or by the reduction of bills payable, or by some combined action of both, it is impossible to tell from the printed accounts. Circulation, at £572,394, has not varied much, but the downward tendency of this item of late years is noticeable. Again, the bank premises, from London, show no alteration in their book valuation. Their figure of £286,600 looks exceptionally small, and has been retained after writing off £150,000 in the last three years by making provision for new’ buildings. London leasehold premises are being gradually reduced, the operation of reserves and accrued interest having brought them down to £100,675. Reserve fund, by its latest addition, has reached £4,850,000. For the first time for several years it has been without the assistance of any direct transfer from profit, such having apparently not been considered necessary in view of the £600,000 received from the recent share issue. Reserve fund keeps steadily ahead of capital, the latest issues improving instead of retarding its relative progress. Although it has increased considerably, the investments earmarked for it still remain at their former aggregate of £1,000,000. Another general reserve is found m the undivided surpluses which now practically amount to £lOO,OOO. With other reserves held against contingencies and a reserve of considerable but unknown quantity contained in the fixed assets, this bank is exceptionally well served in that respect, and is enabled to maintain its dividend at the high rate of 15 per cent.

June Paid-up General Net Bate of 30 Capital. Beserves. Profit. Beturn. Div p.c: p.e. 1922 £3,090,000 £2,546,421 £397,885 13.26 10 1923 3,000.000 2,668,489 422,068 14.09 10 1921 3,476,287 2.789,88G 451,567 12.99 10 1925 3,500.000 2,920,227 480,261 13.72 10 1926 3,500,000 3,055,297 485,069 13.86 10 1927 4,710,412 4,010,181 556,705 11.82 10 1928 4,739,012 4,140,215 653,243 13.78 10

June Bills disDeposits, Ratio 30 counted, etc. etc. p.c. 56.96 1922 ... £17.939,318 £31,493,201 11)23 21.035,479 34,446,065 61.07 1924 22,978.636 33,594,177 68.40 1925 23,72.3,899 36,930,963 64.24 1926 1927 25,844,832 37,034.511 38,539,205 51,239.263 67.06 72.38 1928 37,316,784 51,824,699 72.01

June Reserve Paid-up Ratio 30 Fund Capital. P.C. 1322 £2,460,000 £3,000,000 82.00 1923 2,580,000 3,000,000 86.00 1921 2,700,000 2,830,000 3,476,287 77.67 1925 3,500,000 80.86 1926 3,000,000 3,500,000 85.71 1927 3,950,000 4,710,412 83.86 1923 4,075,000 4,73!),012 85.09

Feb. Paid-up General Net fDiv. 28 Capital. Reserves. Prefit. p.c. 14 1919 ... £2,000,000 £2,288,614 *£180,340 1920 ... 2,500,000 2,911,716 458,102 15 1921 ... 2,500,000 3,020,557 516,340 536,261 15 1922 ... 3,000,000 3,336,818 15 1923 3.000,000 3,439,712 552,894 15 1924 ... 3,000,000 3,540,003 550.292 15 1925 ... 3,500,000 4,242,902 590,398 15 1926 ... 3,500,000 4,295,513 627,611 15 1927 ... 3,500,000 4,347,939 627,426 15 1928 ... 4,000,000 4,949,404 638,966 15

Net Profit. Dividend. Patio p.c. Reserves. Ratio p.c. 1924 £550,292 £450,000 81.77 £100,292 18.23 1925 590.398 487,500 82.57 102,898 17.43 1926 627,611 525,000 83 65 102.611 16.35 1927 627.426 525,000 83.68 102,426 16.1*2 1928 638,966 562,500 88.03 76,466 11.97

Bills discounted, etc. Deposits. Patio p.c. 1919 ... £21,909,004 £26,136,296 83.86 1920 19,763,256 31.840,563 62.07 1921 ... 28,766.010 29,531.558 90.63 1922 ... 24.970,960 29,187,724 85.55 1923 ... 26,350.356 31,390.819 83.94 1924 ... 25,933,296 32,838,018 79.13 1925 ... 26,274.751 33,995.484 77.29 1926 ... 26,778,147 32,038,237 83.68 1927 ... 29,088,976 32,545,478 89.38 1928 ... 27,600,997 33,978,582 81.23