The Bank of New Zealand

Southland Times, Issue 14101, 14 July 1898, Page 3

The Bank of New Zealand

(Evening Post.) The balance sheet of the Bank of New Zealand is still, in its results, far short of the promises made by Mr Watson and the directors of the bank in 1895. Mr Watson estimated the additional earning power of the bank at L 138.750, and anticipated a still further increase after collection of the first call on the contributory liability of shareholders. Fot the purpose of simplicity, we take the sum in round figures at LUO,OOO. In the Banking Committee’s report (1895) the estimate of the directors was stated at L 135,000 — that is to say, after paying LBO,OOO for interest on inscribed stock. If Mr Watson’s estimate be taken with LU,OOO written off as the estimated value of the inscription business in London, which did not fellow the bank, there will still remain a large deficit on the estimated profits. It has to be noted that L 138.750 was the estimate of additional earning power at a time when the bank, but for its connection with the Estates Company, would have been earning large sums of money. Just here the aggregate of *the directors’ estimates for the three years that have elapsed may be compared with the actual results: — Directors’ estimate, £135,000 for three years ... ... ... £405,000 Actual profits ... ... ... 201,481 Deficit £203,519 If any commercial house deal ng with this bank showed such business, what would be the result? What, then, should the country that guarantees this institution do under like circumstances? It is matter for very grave consideration. Even discounting the inscription business, the deficit is more than disquieting, and seems to show that not only is the probability remote that the deficit in the Estates Company will be made up when I the Government guaranteed stock falls due, ‘ but it is doubtful if it will ever be made up,

It cannot surely be said that this small profit has been caused by losses made since 1895, for L 200.000 was eeb aside to meet existing debts that might prove irrecoverable. It will be remembered that under the adjustment of 1895 L 1,350,000 was to be used as follows :— To write off bad debts £376,000 For contingent bad debts ... 200,000 To write down estates, company's shares, etc 773,100 £1,349,100 How, then, is the result as compared with the estimate to be explained ? When commercial men make an estimate that fails of realisation bankers usually conclude that those controlling the business are incompetent or that the business is bad and should be closed down. It is of interest to compare the balancesheet of 1897 with that of 1898. We pl ice the figures in parallel columns : —

There are some features in these figures that do not Lok promising. First, deposits have fallen L 604,815 and bills payable 167,755. This apparently means that foreign exchanges have become restricted, if only to a small extent, but it is a most lucrative branch of banking business. It is not disclosed how interest and non-interest paying deposits stand, but such information would be of service in obtaining an estimate of profit. What the bank holds as securities, &c., will appear from the following comparison of assets for 1897 and 1898:— ASSETS

*1897 — Colonial Government securities, L 789.948 ; Assets Board debentures, L 2,680,285 ; Municipal securities, L 15.567 ; other securities, L 31.901. 1898 — Colonial Government securities, L 678.248 ; Assets Baaic( debentures, LI,880,285; municipal securities,Ll9,4s3; other securities, L 31.900. It will be noted that coin is diminished by L 44.680. The investments have been reduced by the Assets Board debentures to LBOO.OOO and about LlOO.OOO of colonial Government securities, which it may be assumed the bank has sold on the London market. If it took them up at 3t per cent, a profit was no doubt made on the transaction. The liquid assets have, however, by the decrease in coin, etc., and Government securities been lessened by about L 150,000. In the new balance sheet there are instances where two entries appear where one was before. In the old balauce sheet bills receivable and bills discounted were put together; in the new there are two entries— Money at~ short call and bills receivable, L 1.400,309, and bills discounted, L 1,719,929. We notice that the landed property of the bank is valued at about Lil,ooo less. Has any property been sold, or is that the new valuation under the Government Valuation Act ? There are assets on the balance sheet that may be challenged—for instance, the estimated value of the Colonial Bank property. Can it be said that it would fetch the value stated I Then there is the goodwill (L 75.000 of that defunct institution, which should have no place in the bank’s, balance sheet. The debenture conversion account has been written off by about LlO,OOO. It is, of course, out of place as assets. Again, is there any reasonable hope that the 1895 valuation of the B.N.Z. Estates Company, Limited, will be realised ? Would it notr be better to strive to reach the bed-rock of the values instead of holding on to some part of the inflation of the past ? It is a dismal reflection that the hopes so confidently expressed in 1895 are still so far from realisation, and that apparently in the near future something more must be done. Whether the State should extend its fostering care, or whether the institution should be sold, we do not propose at present to discuss; but the fervent hopes expressed that the colony would lose nothing by the legislation of 1894-95 must now be seen to be illusory. Who are to blame? That, as Kipling hath it, “is another story,” and it yet remains to be written.

LIABILITIES. 1897 1898 Guaranteed stock... £2,000,000 £2,000,000 Shares 744,141 893,042 Reserve fund 23,470 23,470 Notes 557.497 593,905 Bills payable 1.387,681 1,219,926 Deposits 8,230,955 7,626,140 Other liabilities ... 601,718 260,202 Bills rediscounted 50,445 34,375 Balance,profit & loss 39,391 74,900 £13,635,302 £12,725,964

1897. 1898. Coin & cash balances £1,357,891 £1,328,153 Bullion ... .m 132,650 117,708 Investment,,. ... 3,509,801 2,609,886 Bills receivable and bills discounted... 2,649,881 3,180,238 Other advances asd securities 4,509,895 4,281,318 First call recoverable 4,141 1,553 Landed property & premises 442,851 431,837 B.N.Z. Estate Co., 1895 valuation ... 580,065 540,442 B N.Z. Estates Co., debentures conversion account ... 68,445 58,312 Colonial Bank property 105,481 101,532 Colonial Bank goodwill 75,000 75,000 £13,436,101 12,725,999