BANK OF NEW ZEALAND

Southland Times, Issue 20044, 4 December 1926, Page 5

BANK OF NEW ZEALAND

HALF-YEARLY MEETING. NEW BRANCH INSTITUTED. The half-yearly general meeting of the Bank of New Zealand shareholders was held on Friday, December 3, 1926, at the head office of the bank, Lambton Quay, Wellington, Sir George Elliot (chairman of directors) presiding. The chairman said— To-day brings to an end the half-yearly meetings that have been held annually in December since the head office of the bank was transferred from London to Wellington. Beyond being the occasion of the election of directors and the declaration of a dividend, it is difficult to find any other reason for their institution. If there ever was a reason it has long since ceased to exist, and in the recent Bank of New Zealand Act, the provision for holding further half-yearly meetings was cancelled. Mr Watson has the honour of being the last shareholders’ representative who will be elected to the Board of Directors at a halfyearly meeting, and, as there are no other nominations for the position, I have much pleasure in declaring him duly elected. ; Mr Watson has without a break, p I director of the bank for 32 years, and his • long banking experience and general know- ‘ lodge are of no small importance in conducting the affairs of this great institution. There are, as usual, no accounts to lay before you, but I have pleasure in stating that the profits earned for the half-year ended September last warrant the payment of dividends similar to those paid for the corresponding period last year. Dividends will be paid in Wellington to-morrow and at I the various branches on receipt of advices. : The proposal discussed at our annual I meeting of setting up a special department ■ for the making of long-dated loans on an ’ amortisation basis, was considered by Parliament last session, and, as you are aware, ‘ an Act known as the Bank of New Zealand ; Act, 1926, was passed giving the bank i authority to enter into this class of busiI ness. As a resume of this Act has been | circulated amongst shareholders, I need not j go over the various clauses. : You will remember that the directors were authorised to issue £1,406,250 in £1 shares, together with three times that amount by way of debentures. As a beginning, half of this number of shares are now being offered to shareholders, and applications for their individual quotas are receivable up to December 31 next. The other half will be issued later if, and when, the demand for loans of this description warI rants it. Debentures will be issued as funds are required for the development of the business.

You will remember that when the scheme was discussed at the annual meeting, it was with the hope that Parliament would agree to make some special reduction in the income tax in connection with this undertaking. The Special Parliamentary Committee set up to consider the Bill, however, was averse to the reduction of taxation in the form that we desired. In view of the fact that no direct profit could be made by the bank on this phase of its activities, the committee recommended that the shares for which the Government had the right to apply should carry a fixed dividend of 6 per cent, as against the fixed dividend of 74 per cent, on shares allotted to the ordinary shareholders. As this reduction of 14 per cent, on onethird of the capital, together with the business of the department being taxed on the same basis as an ordinary joint stock company equalled the special rebate in income tax asked for, an agreement on these lines was arrived at. Power was taken in the Act that, with the permission of the Minister of Finance, further issues of shares and debentures beyond those immediately authorised could be made on the same lines, but no application can be made to the Minister unless the consent of the ordinary shareholders of the bank is first obtained. In the future, therefore, the matter of extending the operations of this new department will be made on the initiation of ordinary shareholders. As the making of long-dated loans on an amortisation basis by a joint stock bank is, to an extent, experimental, the ordinaryshareholders, should they deem it advisable, have the right to wind up the long-term mortgage department, cancel the shares and return all capital at par. It is expected that the expense involved in connection with the activities of this new department will not be great, as all matters connected with it will be carried on by the staff already in existence at the various branches, and although no direct profit can be expected, it is anticipated that a certain amount of indirect advantage may accrue to the bank.

The department will be watertight, trading on its own special resources, and no funds of the bank will be used in its conduct otherwise than that advances up to £500,000 from the ordinary funds may be made pending the raising of capital or debentures. With this exception, it is intended that the ordinary business of the bank and that of the long-dated loans shall be kept entirely separate. This is believed to be-the first instance of an ordinary joint stock bank in any part of the world creating a special department for this class of business, and the experiment will, doubtless, be watched with keen interest by bankers generally, and especially by bankers in countries that specialise in primary production. The directors are convinced of the sound* ness of the scheme and of the benefits borrowers will derive from it.