BANK OF NEW ZEALAND

Southland Times, Issue 19123, 15 December 1923, Page 2

BANK OF NEW ZEALAND

HALF-YEARLY MEETING. CHAIRMAN’S ADDRESS. (Special to the Times). WELLINGTON, December 14. The half-yearly meeting of shareholders in the Bank of New Zealad was held today, Sir George Elliott presiding. PAYMENT OF DIVIDEND. The chairman announced that the halfyear’s operations warranted the declaration of an interim dividend at a rate similar to that paid a year ago. The amount to be distributed would be: An interim dividend of 1/4 per share on the ordinary shares, which will absorb £150,000 A dividend for the year to March 31 next on the preference “A” shares held by the Government 50,000 And an interim dividend on the preference “B” shares held by the Government 25,000 Making a total distribution of .. £225,000 GENERAL SURVEY. Sir George Elliott, addressing the meeting, said inter alia: During the past six months the financial conditions in th£ Dominion have shown some improvement, though there is still much leeway to be made up. Prices of staple products are quite satisfactory, and those primary producers who purchased their land at fair prices, and who are not overburdened with debt, should do reasonably well. Owing to competition from overseas many of our secondary industries are somewhat inclined to languish. Only by increased efficiency and by the adoption of the latest methods in working, will our manufacturers be able to cop® successfully with the flood of importations. The large volume of imports during the last twelve months is causing some concern and, notwithstanding the lesson importers had in 1921-22, there is said to lie considerable overstocking. Articles of luxury, especially, have been imported to an extent that raises misgivings amongst those who recognise the necessity for strict economy in both public and private expenditure. In the Dominion there is no shortage of funds for desirable investments. In the North Island, where a greater demand for money exists, rates for first class mortgages are from 6 to GA per cent., while in the South Island the ruling rate is 6 per cent. Local bodies are in some instances paying 54 per cent, for loan issues, but in most cases 5f per cent, is paid, and even at

the latter figure large investors are not buying freely. The increased income tax on debenture issues has undoubtedly affected these loans; 4| per cent, war loan stock, free of income tax, at present market prices gives a better return to most investors.

The State Advances Department has been inundated with applications for loans, the reason being found in the exceedingly liberal conditions provided by the legislation passed last session. To some extent, these advances have been applied for to clear off existing charges and thus a certain amount of money for investment in other channels is being freed. EXCHANGE POSITION. The exchange position between the Dominion and London and the Dominion and Australia is still most unsatisfactory. With the large surplus of exports over imports between New Zealand and the Mother Country, and a reverse position as far as Australia is concerned, the present rates of exchange are causing much dissatisfaction amongst exporters to Great Britain and amongst importers from Australia. If the banks could simultaneously sell exchange to the full amount of their purchases, the margin between the buying and the selling rates would at once be reduced to a trifling figure, but owing to the position being as it is, this is out of the question. The surplus of exports to Great Britain as against imports has, during the last two years, caused this bank to accumulate very substantial funds in IxitV don. Ever since export of gold became impracticable, there has been no other ordinary method of transferring funds from London, to New Zealand than by way of exchange. Had accumulated surpluses been utilised in New Zealand, they would have earned the higher rates ruling here, tn pre-war times a bank could so conduct its business that only an amount sufficient for its requirements need be kept in London in such loans; the balance could, if necessary, be transferred in gold to New Zealand. Conversely, if the balance of trade went against New Zealand, gold could be re-shipped. As a consequence, the margin of exchange rates was relatively small, and it was stabilised. The price of gold is at present at such a high premium that no bank could afford to import the metal. It is asserted in various quarters that the high buying rate* of exchange have been brought about by banks combining and forcing the rate to a high level with the object of making large profits. BANKS POWERLESS TO RECTIFY. May I say emphatically that this is not the case; our exchange rates either buying or selling, are not in the best interest of banking institutions. It may interest you to know that this bank alone, during the year ended September 30 last, paid away upwards of £60,000 in premiums to buyers from us of exchange on London. It is obvious that if, by force of circumstances, banks are compelled to employ an exceptionally large amount of money in London at a loss, that loss is in some way to be made good, otherwise banks would be forced out pf exchange business altogether. As this particular loss is brought about entirely by the inability to transfer funds, it is reasonable to expect that exchange should bear the whole or the greater portion of that loss. Many suggestions have been made and many schemes propounded to overcome the present exchange difficulties, but none has met with general approval. That proposed by Mr J. F. Darling—a London banker of high reputation—has received the most serious consideration. The Imperial Economic Conference, which met in London in October and November last, considered Mr Darling’s scheme of “Empire Currency Bills” and decided that it was neither necessary nor desirable to adopt his proposals. The Conference, however, expressed the opinion that bank charges for buying and selling sterling appear to lie unduly high in some cases and should be capable of reduction. It seems hard to understand why the banks should be blamed for a position which they have not created and which it is the function of the States concerned and not the banks to remedy. ■A SUGGESTED SOLUTION.

While existing conditions with regard to the balance of trade and the premium on gold continue, equilibrium can be restored only by the Commonwealth and Dominion Governments raising the whole or a portion of their loan requirements in Australia and New Zealand instead of in London. The raising of Government loans in New Zealand instead of in London would solve the exchange problem for this country, but it must be remembered that the raising of loans locally would be more expensive, and funds that might otherwise be available for local enterprises would be absorbed, while interest rates generally would certainly harden. It is a question for the Government to consider, whether, as long as the balance of trade continues so largely in the Dominion’s favour, it might not be advisable to borrow locally and so absorb these surplus funds in London, and, at the same time, reduce the buying rate of exchange considerably—what was lost in interest would be gained in exchange. In any case the country cannot have it both ways. In conclusion—two great distinctive facts stand out —one is this: The farmer who refrained from land speculation came through the time of depression with comparative ease. The other is this: The individuals, firms or companies who wisely carried steadily on, refraining from the temptation to take money on deposit at call for the extension and development of

their businesses, were the individuals, firms and companies that most successfully weathered the financial storm.