BANK OF NEW ZEALAND

Southland Times, Issue 20207, 18 June 1927, Page 10

BANK OF NEW ZEALAND

ANNUAL MEETING OF PROPRIETORS. REPORT AND BALANCE SHEET. The annual report and balance sheet of the Bank of New Zealand was considered at the annual meeting of the proprietors held in Wellington yesterday. Mr Richard Gibbs, acting chairman of directors, presided and presented the report. The report states inter alia:— CAPITAL AND RESERVE FUND.

These combined show an increase of £621,887, representing amount of calls paid up on the C and D long term mortgage shares and the amount placed to reserve last year. The amount standing against the C and D shares includes instalments paid by shareholders in advance. From this year’s profits it is proposed to transfer £200,000 to the reserve fund, bringing it up to £3,025,000. PROFIT AND LOSS. Although the profit for the year, exclusive of that on investments realised or matured, shows a reduction of £65,000 as compared with the figures for the previous year, the actual earnings of the bank were not £3OOO less, the difference being accounted for mainly by a larger recovery of bad and doubtful debts in the previous year. All accounts are most closely reviewed each year, and provision is always made for any advances which is considered the least doubtful. When such accounts are subsequently cleared or placed on a sound footing, the provision previously made then becomes available for transfer to profit. In a business with such extensive ramifications as ours, no amount of care and skill can detect every bad or doubtful account, or exactly determine the possible loss on those considered doubtful. In addition to the specific reserves made for such bad and doubtful debts, we have a substantial contingency fund to provide for possible further losses—a customary proceeding with most banks. DEPOSITS. These show a reduction of no less than £1,457,264 which naturally affects the earning power of the bank. NOTE CIRCULATION. This shows a shrinkage of £678,799 —an indication of leaner times. The increase in the previous year was to some extent due to the Easter expenditure, which did not affect the position on this occasion. COIN, CASH BALANCES, AND DEPOSITS WITH BANKERS. Under this head the figures show but slight variation. MONEY AT- CALL AND SHORT NOTICE. This item shows a reduction of £1,898,248 the amount thus temporarily invested being now utilised in other directions.

GOVERNMENT AND SUNDRY SECURITIES. The total of the three headings setting out these figures shows a reduction of close upon a million. In order to maintain our cash reserves, which were being depleted by increase of advances and reduction of deposits, we found it advisable to realise a portion of our investments in Government and municipal stocks. In some cases, these investments had been well bought; in others—mainly New Zealand Government war loans (to which we subscribed very heavily during the war period—we sold at less than cost. These latter investments, however, had been written down from time to time to market values, but subsequent improvement of such values over our reduced book value has resulted in the surplus shown specially in the profit and loss account. Our present holding of Government and'municipal stocks figures in the balance sheet at considerably less than market value. Shareholders, however, must bear in mind that surpluses of the nature just referred to are of a fluctuating character, and do not reflect the annual earning power of the bank. You will note that the first items on the assets side of the balance sheet, representing the bank’s liquid resources, amount to £22,482,008, compared with £25,066,358 of twelve months ago. The position remains a strong one, but not unnecessarily so in view of the still unsettled state of the world’s finances. BILLS DISCOUNTED AND ADVANCES. These together total £23,924,979, as against £22,662,696 as last shown, a not inconsiderable increase, which, coupled with the fall in deposits of £1,457,264, represents an adverse movement of £2,719,547. LANDED PROPERTY, PREMISES, ETC. These stand at £520,877, as against £484,103 twelve months ago. With our increasing business, it will be readily understood that premises which ten or twenty years ago met requirements now no longer do so, and rebuilding at some points and enlargements at others account for the year’s increase. DIVIDEND. The dividend, which will be payable at Wellington to-morrow and at branches on receipt of advice, is at the old rate, viz., 1/4 per share on the ordinary shares. The possibility of a 1 per cent, bonus for the year being forthcoming was foreshadowed in a previous report, and I am pleased to say our earnings warrant this, and the modest amount, representing 1/- for every £5 of capital, will be distributed with the dividend. The dividend on the long term mortgage shares will also be payable to-morrow. PROGRESS OF THE BANK. Having explained the fluctuations for the year under review, I would like tersely to carry the comparison a step further. The fateful year 1914 is a favourite period with many institutions for a postwar report of progress or the reverse, and if you will allow me to take you back to the balance sheet issued as at March 31 of that year and compare it with the figures now before you, I think you will agree with me that it shows a progress of which we have occasion to be proud. 1914 1927 £ £ The total of the Balance sheet in 1914 reached what was then considered a very respectable fig- » ure, viz 24,400,250 The present balance sheet doubles that figure and stands at 48,860,540 Capital account has increased from .. 2,000,000 to .... .... .. 6,529,185 and deposits, which in 1914 stood at .. 18,070,613 now total 29,664,024 and advances and discounts from .. .. 11,360,486 have gone to .. .. 23,924,979 The staff has increased from 1001 to 1495 and the pay sheet, in the way of salary and bonus, from £207,000 to £470,000. I will not weary you by continuing the comparison further, but if, as has been said, “Growth is the only sure evidence of life,” then I think the Bank of New Zealand may be considered to be very much alive. BOARD OF DIRECTORS. The two directors to retire in March last were Sir Harold Beauchamp and Mr Oliver Nicholson; both were reappointed by the Government. Sir George Elliot was reelected chairman for the ensuing year. He left for a trip to the Old Country in April last and my colleagues did me the honour of appointing me acting-chairman during his absence. WORLD CONDITIONS. While conditions generally may be considered on the whole to have improved, they still give rise to much uncertainty as to the future and necessitate conducting our finance on a strong basis. The effects on finance and trade of the prodigious payments to America by Britain and the Continent by way of principal and interest on their war debts have not yet been fully realised, but the situation opens up some large problems which are already causing concern on both sides of the Atlantic. One of America’s foremost economists, Mr Irving Fisher, of Yale University, in dealing with the war debts to his country, remarked:—-

“When we think in terms of money, we think Europe should pay; but when we realise that her payments must be in goods, we try to shut these out by tariff wall. So not only are we Europe’s taskmasters, but we demand that they make bricks without straw’. Let us be honest. Europe can’t pay by piling more gold on our shores, and our heap is too big already. Then if Europe is forced to pay in goods, we should let the goods in freely, or if we are not to let them in freely, we ought net to insist on payment.” These few lines give occasion for some hard thinking, and the world’s future financial stability is largely wrapped up in the problems which are therein dealt w’ith, the solution of which must have a wide-reaching effect. This and other important world-wide economic questions will doubtless be receiving special consideration at the Geneva Economic Conference, which our chairman. Sir George Elliot, is attending as one of the tw’O New' Zealand delegates. STAFF. A booklet published by the secretary of a certain political party, with no doubt a deliberate attempt to sow discontent among our staff, who wisely are independent of any union, stated that the shareholders of the bank were receiving more than the amount paid to the whole of the staff and directors. The statement would have had a more honest ring about it had it further shown that, whereas the staff numbered about 1500, the shareholders totalled close on four times that number, of whom no less than 4000 were small holders of 500 shares and under, many of whom had invested their small savings in the bank as provision for their reclining years. I can claim an intimate knowledge of our staff, having joined as a boy, and having been your servant in one capacity or another for fifty years, and I am satisfied that a more loyal and contented body of men generally, it would be hard to find. Our men are well paid and cared for, and are always sympathetically treated; they know this and acknowledge it, and it will require better argument than the above to disgruntle them. We have no such thing as patronage in the service, and it is open to any man, by efficiency, hard work, and tact, to rise by his own merits to the top. The thanks of the shareholders are due to our very capable general manager, whose entire energy is spent in their interests, and to the loyal and capable body of men under his control.

An important institution connected with the bank and staff is the Officers' Guarantee and Provident Association. It will perhaps not be amiss to bring its existence before you with a little more prominence than the mere reference to it in the profit and loss account. The association is incorporated by Act of Parliament, and is controlled by five trustees, three of whom are elected by the staff. The total funds now reach the satisfactory sum of £1,126,285, variously invested outside of the bank. The annual contribution by the staff is at the rate of 3f per cent on salary received, the bank supplementing this by contributing 74 per cent on the same basis. There are 140 pensioners on the list, and pensions range from the minimum £225 (at present augmented by high cost of living bonus to those drawing less than £350 per annum) to £7OO, which is the maximum. Quinquennial investigations by an actuary determine, of course, the extent of the benefits derived. From the foregoing you will see that our officers, when they pass beyond the stage of active service, are well cared for, and I am sure you will always approve of the bank’s annual subsidy which appears each year in our accounts. Mr William Reece, in seconding the adoption of the report and balance-sheet, said: — The chairman has, I think, so fully and ably presented the chief points of interest in the year’s work that there remains little to be said, and there is only one matter to which I will refer. You are all aware that, during the past few months, a good deal of criticism of the bank has appeared in the papers and been utterd by gentlemen who have been speaking in public. These criticisms have largely referred to the bank’s attitude as a lender towards farmers who desire to be borrowers, and it has many times been suggested or stated, that the attitude of the bank has not been as helpful as it should have been. I have now been a director of the bank for many years, and have had full opportunity of seeing what has been the bank’s policy and practice in the matter of loans against farming securities, and I have no hesitation in saying that every application which has come before the bank has been dealt wth upon its merits, and that, during the difficult period through which we have recently been passing, no farmer applicant has been refused an advance if he was in a position to give the bank satisfactory security. There have no doubt been cases where the bank’s idea of satisfactory security has differed very materially from that of the applicant. Our criterion has been that of productive capacity of the land, and, in valuing securities offered to us, we look mainly at that factor and estimate the value for security purposes upon the return which the land has produced over a series of normal years. Were we to adopt any other basis of valuation, we should be running risks which we could not justify. As evidence that the bank has not been unduly exacting in its relations with its farming customers, I might add that the greater part of the losses for which we have to make provision during the past few years have been made on the accounts of farmers and of farmers’ companies.