BANK OF N.Z.

Southland Times, Issue 25312, 15 June 1935, Page 9

BANK OF N.Z.

ANNUAL MEETING CHAIRMAN’S REVIEW ‘ ' 7 • \ . (Special to the Times.) Wellington, June 14. The annual meeting of proprietors of the Bank of New Zealand was held today, Mr William Watson, chairman of directors, presiding. In the course of his address the chairman said:— „ The 4 per cent. Guaranteed Stock, £529,988 10/6, which was for so long included in our capital figures, fell due oh July 19 last and was repaid from the Bank’s London resources. The figures otherwise remain unchanged. Notes in circulation total £503,778 10/*-, as compared with £4,259,149 at March 31, 1934. For a number of years the rate the banks paid for the right of note issue was 3 per cent, per annum on their notes outstanding as calculated from week to week, but five years ago the rate was raised to 4J per cent., which, with the costs of the notes and expenses in connection with them, left little or no profit to the banks. On August 1 last the Reserve Bank exercised its sole right to issue notes in the Dominion, but until August 1, 1936 the trading banks will continue to pay the tax on their unredeemed notes after which date each bank will pay over to the Reserve Bank the face value of its notes outstanding and cease to pay further tax. Large quantities of notes on which tax is now being paid have been destroyed in various ways, and while the trading banks will pay the full face values of these to the Reserve Bank, that Bank will, of course, never be called upon to repay the losers. Banks’ Note Holding. At March 31, 1934, the trading banks” notes in circulation amounted to approximately £6,200,000; on the corresponding date this year they had been reduced to about £850,000, while the notes issued by the Reserve Bank totalled over £9,300,000. The larger amount is accounted for by the fact that the trading banks have to purchase Reserve Bank notes for till money. Our average holding for this purpose is well over £2,000,000. Deposits show a reduction of £1,129,390, the greater portion of which is accounted for by transfer of Government balances to the Reserve Bank. Coin, Reserve Bank notes and deposits with bankers are lower by £567,086. The wording of the heading has been altered to include notes of the Reserve Bank. Money at call and short notice, Government securities and other securities in London show an increase of £3,422,121, due to our purchases of London exchange having exceeded sales. Bills receivable in London and in transit are less by £1,008,420, owing principally to lower prices for wool _ New Zealand Government securities, £3,147,671, are less by £5,567,861, due to repayment of New Zealand Government Treasury Bills. Australian Government securities show a reduction of £93,087. Advances and bills discounted, etc., £21,490,731, show at slightly lower figures than a year ago. Loans to the State against discharged soldiers’ settlement mortgages have been repaid. Our advances to the public show an increase. The Dividend. An interim dividend of 5 per cent, was paid in December last. The profits permit the payment of a further dividend of 5 per cent., making 10 per cent, for the year—the same distribution as last year. It is, of course, earned on the whole funds and not on the capital alone. The dividend on all classes of shares will be payable in Wellington to-morrow, and at branches on receipt of advice. Sir Robert Anderson, I regret to say, found it necessary in April to retire from the board owing to ill-health. Sir Robert had been a member since August, 1930, and had he remained in office, he would have been elected chairman for the current year. The board passed a minute regretting Sir Robert’s retirement and expressing sincere appreciation of his services as a director of the bank. Mr A. T. Donnelly, of Christchurch, who you will be pleased to see is with us to-day, was appointed by the Government to fill the vacancy on the board. Sir Harold Beauchamp and Sir George Elliot were granted leave of absence to visit England, and while in London are associated with our board there. London Board. The board has done me the honour of electing me chairman for the year. We have again to express appreciation of the services of our London Board, and also of the services of Sir John Higgins and Sir Henry Braddon, who are local directors at Melbourne and Sydney respectively. I am pleased to say that Sir George Schuster, K.C.5.1., K.C.M.G., M.C., formerly Finance Member of Executive Council of the Viceroy of India, has joined our London Board. The board again desire to express appreciation of the efficient services of the. staff at the various points during the year. The General Manager, Mr F. W. Dawson, in his careful management of the Bank’s affairs, has given ample proof of his ability. The staff in general is zealous and efficient. At our last meeting, eulogistic references were made to the distinguished services of Sir Henry Buckleton, who a short time previously had retired from the position of General Manager. His sudden death in December last came as a great shock to us all, and I am sure you will share the board’s deep regret at his passing. Sympathetic messages were conveyed by the board to Lady Buckleton and her family. Banks as well as ordinary traders have been criticized in this Dominion for accumulating reserves out of profits, the deductions apparently being that beyond a narrow margin between the rates on deposits and advances, no profit should be made on the banks own.funds, that we should not fully employ our resources, or that we should pay all profits away. Had such imprudent practices been universally adopted prior to the recent depression, not only would many trading establishments have been unable to continue paying their employees when trade was unprofitable, as happened in the early nineties of last century, but banks would have been unable to carry their customers through,' or to face the losses which were unavoidable. New Zealand was fortunate in having strong banks which were able to carry on their customers and also extend considerable temporary assistance to the Government. Our joint stock banking system is founded upon that of Great Britain, considered by Lord Snowden the best in the world, but there are people who think it antiquated and if they could get their way would dissipate the reserves; however, they are not men with a practical knowledge of banking. Not long ago a visitor to this Dominion was reported by the Press to have stated that oqr banking system was behind the age and would not be tolerated in his country: a little later on banks in his country failed by the thousand, while none failed in British lands. Shareholders, and also the Dominion, are to be congratulated on the strength of this institution, which strength is due to the accumulation during many years of its various re-i

serves ,and has cabled it to perform an important part in the development of both land and industries.

In this connection, we have to thank Mr Leslie Lefeaux, Governor of the Reserve Bank of New Zealand, for his acknowledgment at that bank’s annual meeting, of tha services which the trading*” banks render to the country. This is in pleasing contrast to the adverse propaganda of those who cannot be considered so well' informed. Government Banking Account

The Government banking account was kept by the Bank of New Zealand for over 70 years, and, we believe, with entire satisfaction to all the Governments. On August I, 1934, the account was taken over by the newly-formed Reserve Bank, but it was arranged that we should conduct the business at all places in the Dominion, with the exception of Wellington. l Assertions have been made in speeches, and in correspondence to the Press, that there is much idle money in the trading banks, and some persons have gone so far as to say that money deposited in banks was equivalent to its abstraction from, general use. The expressiori of such ideas is, of course, quite an erroneous one and apt to be misleading. Taking our own balancesheet now before you, it will be seen that the whole funds of the bank, including deposits, are put to use,-ex-cepting the proportions of deposits we are bound by law to place in the Reserve Bank, and the money we have to hold in hand against the exigencies of our business. Were it not so, it would be difficult indeed to pay the salaries and other expenses of the bank, let alone any dividend to the proprietors. The principle of banking, like that of any other trade, is plain service to the public, and, in the case of deposits, to receive them at interest and for safe keeping. Banking and Trade Figures. The banking figures of the six trading banks for the March quarter, compared with the corresponding period of last year, disclose an increase of £2,307,485 in free deposits, a practically similar decrease in fixed deposits, and an increase of £1,501,589 in advances. On November 2 last the banks reduced their interest rates for fixed deposits received in New Zealand on or after that date by i per cent., the revised rates being as follows: , 3 months—lJ per cent, per annum 6 months—l| per cent, per annum 12 months—2| per tent, per annum 24 months—2J per cent, per annum From December 1 the minimum rate of overdraft on best accounts was reduced to 4j per cent. The average figures for four years of deposits and advances of the six trading banks for the March quarter are as follows: March Free Fixed . • Qr. Deposits. Deposits. Advances.

Increased Advances. . While the total deposits at March last show practically no movement as compared with 1934, during the same period advances have increased somewhat, the excess of deposits over advances being £18,023,228, as compared with £19,537,907 a year ago. The trade figures for the year ended March 31, 1935, with those of the three preceding years added for purposes of comparison, are given below. The figures are in sterling: Year to Excess of Mar. 31 Exports. Imports. Exports.

It will be noticed that exports show a reduction of £>843,000 as compared with 1934, while imports have increased £5,174,000, the excess of exports over imports being £9,903,000 sterling' for the year. The Outlook. You will probably expect me to say something as to the outlook. As far as the Bank of New Zealand is concerned, I see no reason to anticipate any decline in its progress. Ordinary trade and the manufacturing industries have during the year, no doubt partly owing to more confidence as regards the exchange rate, and also to the favourable prices obtained for last season’s wool. The Public Accounts disclose that for the past financial year the revenue amounted to £26,126,000 and the expenditure to £24,500,000, leaving a surplus of £1,626,000 principally due to profits on the sale of portion of the gold taken over from the banks and unusually high receipts from death duties. Although the prices of our main products generally are at low levels, and our principal market is threatened with restriction as regards dairy produce and meat, it is better to be hopeful than pessimistic regarding the future and to strive for, and look forward to, better things. A visitor with experience of South America recently told us that our land values were too high. He was only stating what a great many people in New Zealand believe to be the fact. Easy and plausible remedies are suggested to restore good times. Industry and thrift seem to have little place in some of these ideas which, were they put into operation, would make the position of the people very much worse. It is surely better to face our difficulties than look for easy and futile ways of avoiding- them. New Zealand is in many respects a very favoured country. It should be borne in mind that ups and downs are the common lot of a people, and that our present difficulties, unpleasant though they may be, are not beyond the power of men to overcome.

£ £ £ 1932 16,998,822 34,466,289 50,232,337 1933 17,461,282 35,208,988 39,455,883 48,500,274 1934 21,657,550 41,575,526 1935 23,965,035 37,135,308 43,077,115

£ £ £ 1932 30,857,000 22,510,000 8,347,000 1933 32,677,000 22,049,000 10,628,000 1934 36,834,000 20,908,000 15,926,000 1935 35,985,000 26,082,000 9,903,000