BANK OF NEW ZEALAND

Southland Times, Issue 21732, 18 June 1932, Page 10

BANK OF NEW ZEALAND

ANNUAL MEETING. THE CHAIRMAN’S REVIEW. ITEMS FROM BALANCE-SHEET. Wellington, June 17. The annual meeting of shareholders of the Bank of New Zealand was held to-day, the chairman of directors, Mr Oliver Nicholson, presiding. In the course of his address the chairman said:—The balance-sheet is expressed in New Zealand currency and no special provision has been made for the difference in the currency value of the net assets in Australia caused by the adverse exchange rate, as the appreciation in sterling assets in London is greater than the depreciation in the net assets in Australia in so far as these are affected by the exchange rate. Shareholders’ funds in the Bank are: Paid-up Capital (exclusive of £529,988 of Guaranteed Stock) £6,328,125 Reserve Fund 3,575,000 Balance of Profit carried forward 395,056 £10,298,181 In addition, there are internal reserves which, although less than last year, are still most ample. Notes of the Bank in circulation at March 31 amounted to £4,062,762 —a higher figure than usual owing to increased demand consequent on the Easter holidays. The average circulation for the year was £3,523,753. The Government has extended, until January 10, 1935, the period for which the Note Issues of the Banks in New Zealand are to continue as legal tender, subject, however, to the proviso that if, by an act of the General Assembly, a Central Reserve Bank is established in New Zealand, such notes shall cease to become legal tender not earlier than six months after such act has been passed. Deposits show a decrease for the year of £758,842. Non-interest bearing deposits are less by £203,290; interest bearing have increased by £734,204; and Government deposits have been reduced by £1,289,758. It is rather amazing that, in an enlightened country, there should be so many opinions expressed to the effect that too much money is locked up in Bank deposits to the detriment of its usefulness. One would expect it to be obvious that Banks could not afford the interest and other expenses of deposits unless use was made of the funds so supplied. They are, of course, used in making advances to those in agriculture, manufacture and trade. A decrease of £688,380 is shown in the item “Bills Payable and Other Liabilities,” a great portion of which is due to a transfer from Contingency Account (which is included in “Other Liabilities”) to meet the heavy fall in the market value at September last of our investments. These investments, however, have since (with the exception of our holding of New Zealand Government securities) more than recovered the amount written off in September, but we have not thought it is necessary to restore the amount withdrawn from the. Contingency Account. The latter account has also been drawn on to provide for our losses resultant from the earthquake in Hawkes Bay in February 1931. There still remains a substar tial balance in Contingency Account. Profit for Year. The profit for the year was £587,023, being £258,790 less than for the previous period, and £361,511 less than for the year which ended March 31, 1930, a reduction of 38% as compared with the 1930 figure. It will be gathered from these figures that this Bank is shouldering its full share of the effects of the severe depression which has come upon the country. Our large connection with the pastoral industry, which is suffering more than any other, has necessitated our providing for considerable present and prospective losses, but we are not without hope from our past experience in. this direction that much of the provision made will, on any material improvement in prices taking place, be recovered. There is an increase of £590,742 in the item “coin, cash balances and deposits with bankers.” Money at call and short notice, Gov- ! ernment securities and other securi- ' ties in London, bills receivable in London and in transit are less by £91,104. Investments are distributed as fol- . lows:—

British and New Zealand Government Securities and securities of Local Bodies £8,812,715 Australian GovernmentSecurities £3,647.732 The market value of these investments is largely in excess of the above figures, and the face value is still larger, so that if we do not require to

sell the investments before maturity there will be a very considerable surplus on these items. Our holding of New Zealand Government securities was increased by £1,215,425 in the form of Treasury Bills, and we have agreed to make further and very substantial advances to assist the Government through its present financial difficulties You will observe that our most readily realizable assets total £24,199,749 —a very, strong position indeed. The decrease of £2,746.893 in advances and bills discounted reflects the depression through which the country is passing. There has not been much demand for advances of a safe nature, and we have met all legitimate demands of our own customers. Many of our farmer customers are unable to make ends meet; in addition to assisting them to the limit of safety we have made many concessions in interest rate, indeed, frequently not charging any interest at all. Owing to present uncertain values it has been difficult to assess the measure of provision required to cover losses on bad and doubtful advances. It is felt, however, that our assessments have been made on a most drastic basis. Dividends Payable. The final dividend, which will be at . the following rates, will be payable in Wellington to-morrow, and at the various branches on receipt of advice:— “C” Long-Term Mortgage Shares 6 % per annum. “D” Long-Term Mortgage Shares 7| % per annum. Preference “B” Shares 10 5-33 %. (Mai ’ -g 13 2-11 % for the year) Ordinary Shares 7 2-3 %. (Making 14 1-3 % for the year) In order to obtain a true perspective of the rate of interest earned by the Bank, consideration must be given to the amount of the effective funds of the shareholders employed in earning the distributable profit. On this basis the net profits augmented by the sum taken from the amount carried forward in previous years represents a rate of interest not in excess of the ruling rate prevailing in the ordinary field of investments. It is very interesting to note the extent of the amount paid during the year to the Government by way of dividends and taxation. This amounted to £644,248, viz.: Dividends £245,312 Income Tax 239,867 Land Tax 2.409 Note Tax 156,660 £644,248 as against £594,263 paid in the preceding year made up as follows: Dividends £245,312 Income Tax 196,524 Land Tax 18,863 Note Tax 133,564 £594,263 Recent Government Loan. The Government raised a 5 per cent, loan of £5,000,000 in London last April at an interest cost of about 5| per cent. The issue was very favourably commented on by the Press, but unfortunately it was made just as a sudden and quite unexpected cessation i of the demand for gilt-edged investi men’s set in. The underwriters were ’eft with 47 per cent, of the loan, but on the market improving, this balance , of the issue was quickly absorbed. Four millions of the loan is to be utilized -for repayment of that amount of Treasury Bills maturing in London this month and one million for Public Works. The Dominion has every reason to be satisfied with the result of the loan, which reflects the high credit New Zealand enjoys on the London market. The exceptionally low rates for money now ruling in London should enable the Government to finance there temporarily on Treasury Bills, thereby obviating the necessity for remitting funds from New Zealand at the present high rate of exchange and also saving a considerable amount in interest. It must not, however, be overlooked that the recent riotous occurrences in Dunedin, Auckland and Wellington have, for the time being, had a disturbing effect on the country’s credit on the money market in London.