THE BANKING AVERAGES

Otago Witness, Issue 3996, 14 October 1930, Page 19

THE BANKING AVERAGES

ADVERSE CONDITIONS REFLECTED.

LENDING POWERS RESTRICTED. WELLINGTON, October 10. The returns of the six trading banks in the Dominion for the September quarter reflect the adverse economic conditions prevailing. The demand and time deposits in the aggregate show a shrinkage of £2,018,187 compared with the corresponding quarter of last year, while the advances and discounts combined have increased by £2,968,909, and there is a shrinkage in the note circulation of nearly £200,000, which is an indication that purchasing power has contracted. The three classes of deposits compare as under:—

_ , Sept., 1929. Sept., 1930. Deposits. £ £ Government 2,799,140 3,600,100 Demand 23.968,295 20,805,171 Tlme 30,600,331 31,472,268

Totals 57,367,766 56,150,539 There is an increase of £800,960 in Government ~ deposits and an increase of £1,136,937 in the time deposits, but the demand deposits, which are important as representing spending power, have contracted by £3,165,124. All banks show shrinkages in their holdings of demand deposits, as will be seen by the table appended:—

Totals .. 23,968,295 20,803,171 3.165,124 The shrinkage shown by the Bank of New Zealand is more than half of the total, but it must be remembered that this bank does probably more than half the banking business of the Dominion. The time or fixed deposits have increased by £1,146,937, the figures of the several banks showing as under: —

Totals .. 30,600,331 31,747,268 1.146,937 * Decrease The demand and time deposits together show a contraction of over £2.000.000, but the aggregate is larger than it was at the September quarter of 1926 and 1927. and this is shown as follows: —

It will be noted that while the time deposits have expanded steadily year after year the free deposits have fluctuated considerably, and the aggregate for the past quarter is the lowest in the five years. The significance of this should not be overlooked.

While the deposits have contracted, the borrowings from the banks, as represented by advances and discounts, show a very substantial expansion. The movements in the advances as they affect each bank are as follow: —

Totals .. 48,543,604 51,399,840 *2,856,236 * Increase; t Decrease.

Three of the banks show increases amounting in the aggregate to £3,247,800, while the other three show an aggregate contraction of £391,564. The heaviest strain has fallen upon the Bank of New Zealand, for more than two-thirds of the increase has been found by that institution, lhe discounts dor the quarter total £1,107,061, as compared with £994,388 in the corresponding quarter of last year, an increase of £112,673.

The advances and discounts combined very nearly equal the fixed and free deposits combined, and from a banking point of view this is not desirable. Comparing these items for the September quarter of five years, the position is as under:—

For the past four years there has been a substantial excess of deposits each year, and the banking position was easy. That is to say, the banks were in possession of ample funds for meeting any demands for accommodation that may have been made on them, but now the very limit appears to have been reached. The banks can lend no more than they can borrow, in fact, not nearly so much. If anyone in the deposit banking system can be called a creator of credit it is the depositor, for the banks are strictly limited in their lending operations by the amount which the depositors think fit to leave with them. The banks must now either raise the rate on overdrafts or pursue a system of rationing advances, and it is most likely that they will adopt the latter course. There is also the exchange on London, which has undergone another change since The banks in the Commonwealth have advanced the rates, It is understood that the Associated Banks will be issuing a manifesto explaining the present position and probably announcing rationing of both exchange and advances. The movements in the note circulation and coin and bullion show as under:—

The community must, it seems, expect some banking stringency; but the banks thet'c°t to be harsh or unsyinpa-

Sept., Sept., — 1929. 1930. Decrease. Bank. £ New Zealand 11,284,524 9.669,786 1.617,738 Union .. .. 2,642,046 2,410,896 231,150 N.S. Wales 2,598,544 2,226,859 371,685 Australasia 2,313.767 2,091,145 222,622 National 4,121,387 3,442,224 679,163 Commercial 1.008,027 962,261 45,766

Banks. Sept., 1929. Sept., 1930. Increase. £ £ £ New Zealand 15,224,528 15,705,365 479,837 Union 32,286,103 3.534,081 247,978 N.S. Wales 4,072,196 4,088,366 16,170 Australasia 2,822,955 2,844,865 21,910 National 4,518,422 4,922,955 404,533 Commercial 676,127 652,636 *23,491

Sept. Free Fixed quarter. Deposits. Deposits. Totals. 1926 £ £ £ .. 24.907,961 21.074,892 45,982,853 1927 .. 21,815,504 23,398,246 45,213,750 1928 .. 23,344,954 29,251,064 52,590,018 1929 .. 23,968,295 30,600,331 54,568,626 1930 .. 20,803,171 31.747,268 52,550,439

Banks. Sept., 1929. Sent., 1930. £ £ New Zealand 20,738,919 23,167,789 * 2,428,870 Union 5,762,166 5.879,935 *117,769 N.S. Wales 5,903,411 6,604,572 *701,161 Australasia National 4,975,432 9,519,940 1.643,736 4,807,499 9,302,355 7167,933 1217.585 Commercial 1,637,690 76,046

Sept. Excess of Deposits. Advances. Deposits. quarter. £ 1926 .. .. 45,982,853 48,323,946 *2,341,093 192" .. .. 45,213,750 48,815,231 *3,601,481 1928 .. .. 52,596,018 45,119,424 7,476,591 1929 .. .. 54,560,626 49,537,992 5,030,634 1930 .. .. 52,550,439 52,506,901 43,538 * Excess of advances.

Sept. Coin and quarter. Circulation. Bullion. £ £ 1926 .. .. 6,485,438 7,792,228 1927 .. .. 6,279,329 7.873,626 1928 .. .. 6,166,287 7,350,045 1929 .. .. 6,272.353 7,109,873 1930 .. .. 6,039,175 6,838,877