FINANCIAL REVIEW.

Sun (Christchurch), Volume III, Issue 883, 8 December 1916, Page 8

FINANCIAL REVIEW.

BANK OF NEW ZEALAND MEETING. MR. HAROLD BEAUCHAMP ADDRESSES SHAREHOLDERS. [Special to The Sun.] WELLINGTON, December 8. The half-yearly meeting of the proprietors of the Bank of New Zealand was held at the Banking House, Lambton Quay, Wellington, to-day. Mr Harold Beauchamp (chairman of directors) presided. The chairman after referring sympathetically to Ihc death of the late Mr Martin Kennedy, proceeded to review the financial position, and in the course of his remarks said:The military situation may, 1 think, be described as an improved and improving one. There is reason to believe that oui adversaries' reserves of fighting men of the best quality are becoming exhausted, and that the reinforcements he will in future be able to command will consist of material of a decidedly inferior class We, on the other hand, are bringing into (lie field new troops of splendid physique, efficiently trained and equipped, and all fired with an enthusiasm which draws its inspiration from the conviction that we are lighting in a righteous cause and that victory, though it may be long delayed, must eventually be ours. And we civilians share with our soldier sons this same unshakeablc conviction. A review of what has been achieved in the campaign of last summer and autumn fills us with hope for the future. We cannot, of course, expect much effective work to be performed until the winter is past, but we look forward with sanguine anticipation to the opening of next year's spring offensive and in the fervent hope that the operations of il*l7 will be effective in crowning the Allied arms with victory and bringing the war to a swift termination.

From a reliable source we hear that, in less than six months hence, Great Britain's industries and resources will be mobilised to such an extent, that she will be able to supply all her own requirements in respect to ammunition and big guns, and largely assist her Allies.

A Free Gold Market. Passing from the military to the financial aspects of the war, with which this address is more naturally concerned, I would remark that one of what may be called the wonders of the war has heen the marvellous ease with which, so far, the enormous financial requirements for military and other purposes of Great Britain and her Allies have been met, whilst ai the same time London has maintained its traditional reputation as a free gold market. This amazing achievement was very tersely and forcefully commented upon in the "Statist" (one of the leading London financial journals) of 23rd September last, from which I take the liberty of quoting, as follows:

If at the beginning of the conflict any one had been told that Great Britain was to be called upon for two or three years—and perhaps for a longer period—to finance the whole of its own imports and those of its Allies, to finance them moreover, with commodities at record high prices, and at a moment when a great portion of the industrial population was mobilised for war, he might well have been excused for wondering whether, under such conditions, it would be possible for England to maintain its position as the great free gold market of the world. And yet the wonderful thing has happened. The demands upon Great Britain have been even greater than could have been imagined in the wildest dreams, for (luring the past two years our adverse trade balance must have amounted to many hundreds of millions of pounds. In spite of that fact, however, we find that whereas, immediately on the firing of the first shot, Germany shut down on her gold and has ever since hoarded it jealously, Great Britain from the start, and the other Allies at a later period, have utilised their enormous public and secret gold reserves as such reserves always should be utilised in times of emergency. So far from shutting down upon our own gold supplies, we must have sent abroad since the war began very little short of £200,000,000, most of which has come from our own stores (including the output from South Africa), the amount contributed by the Allies, though useful and timely, being, of course, moderate when compared with the huge size of the credits granted by us. And yet, in spile of the freedom with which this gold has been outpoured, our central stock of the metal is some £15,000,000 greater than it was previous to the war, while in addition nearly £30,000,000 of gold has, of course, been set aside on account of the Note Curen cy Reserve." The "central stocks" referred to are, of course, the stocks of the Hank of England. These on July 22, 1914, amounted to .. C:S<S,r>li 1,000 On November 1 last they stood at 51,120,000 An increase of £15,802,000 In addition lo the slocks of the Bank of England, considerable gold reserves are held by the large British banks. This position must in the circumstances be regarded as satisfactory, and indicative of sound finance and strong credit. The Bank of England rate was advanced from 5 lo 0 per cent, on July 13 last, and the following day the rales for British Treasury Bills were advanced lo: — .'! months ">\'/ c (i months s : {'/4 12 months 0% At the end of September the rale for Treasury Bills was fixed at ■">:!• per cent, for all currencies, and a new issue of Exchequer Bonds was announced carrying interest at 0 per cent, and maturing on February IG, 11)20. The design of this arrangement was doubtless to divert money from the, short-dated Treasury Bills (of which an enormous amount—■ some £l,o4o,ooo,ooo—were current) to the longer (though still short) term Exchequer Bond. The effect of the new Exchequer Bond issue on a 0 per cent, basis was very depressing upon all investment stocks, and a permanent lowering of quotations on the exchanges took place. The British Government appears

to prefer to finance meantime on short dated bonds, and is apparently | desirous of postponing the funding ; of its floating liabilities in the expectation that some decided change in the war situation, in favour of the. Allies, will afford the opportunity to float a loan on more favourable terms; than would at the present time bei obtainable. The amount thus out-! standing on these short-dated obligations at the present time exceeds con-J sidcrably £1,000,000,000, or, if Exchequer bonds he included as shortdated obligations, £1,500,000,000. Financing the War. Tire total British Government borrowings since the commencement of the war amounted, at September Hi last, to £2,405,209,000, and as the expendrlure is at the rate of about 51 millions per dienr, the debt will have since been largely increased. And still the outlay goes on. Britain is, however, becoming more self-reliant as time passes, and is consequently spending less outside and more within her own borders. This means, of course, that while tire indebtedness of the State as a collective unit is enormously increased, the wealth of the individuals, constituting the Stale in which the borrowed money is expended, is also largely increased. The wellbeing of tire individuals comprising the Stale is promoted, though lite Slate itself may he driven to the verge of financial extremity. Britain, however, in the meantime is in no such extremity. Her Chancellor of the Exchequer, in an announcement on the subject a short time ago, staled that the country's finances were absolutely sound and that, assuming the war continues until March 31 next, the existing taxation would cover all the necessary peace expenditure, provide all the interest on the National Debt, and a sinking fund which would redeem the whole debt in 40 years, and moreover give a surplus which would admit of the abolition of the excess profits tax besides reduction in other taxes. Surely a country with such a. record might cheerfully face a future of darker portent than that at present in view. As an American writer has remarked:—

"When the history of the war comes to he written, it will he- found that the wealth of Great Britain, and the genius of her financial men, have heen predominant factors in defeating the aims of Germany. Who can douht that just as the genius and resources of Great Britain have proved equal to the task of financing this war, so they will prove equal to the task of reconstructing the national life on the conclusion of the war." Whilst the demands for munition supplies from the United States of America are now greatly reduced, considerable importations from America both of munitions and merchandise are still going on to Britain and British Dominions, and an adverse state of the American exchange still continues. By careful manipulation, however, it has been found possible to prevent the violent fluctuation in the exchange rate which marked the autumn of 1915, and for practically the whole of the current year the rate has been fairly steady, fluctuating between $4.77 and .$4,761, or a discount of roughly £2 per £IOO.

The war has effected a tremendous change in the financial position of the United States relatively to the i rest of the world. America has, forj the time being, become a lending nation, and having regard to the wonderful expansion of her exports to] Great Britain and other countries,! one does not wonder at the amazing; growth of her wealth. Note these! figures.—ln the month of September, I American exports made a new re-| cord, when £102,570,000 worth of! goods were sent abroad. The exports were greater than ever before in one month, and exceeded the previous re- j cord made last August by about £OOO,OOO. In announcing these statistics, the Department .of Commerce pointed out that American export trade was approaching the £1,000,000,000 mark: the total exports for the 12 months ended September 30 was £994,390,000, exceeding that for the same period the year before by £358,900. The net inward gold movement aggregated £17,143,000 for September and £91,207,000 for the year ended September 30. Last year the figures were £8,000,000 'and £41,089,000 respectively, the net inward gold '.novement having doubled in one year. Gold Payments to America. Gold has been poured into America to such an extent that Americans are now coming to regard with disfavour settlement of indebtedness by that means, because shipments increase to an abnormal and unnecessary extent their holdings of unremunerative funds and, it is apprehended, accumulation may lead to a period of reckless speculation in an endeavour to provide employment for idle resources.

America is consequently becoming I more favourably disposed towards I settlement by loans instead of by cash. A few months ago a loan of £50,000,000 known as the "collateral loan" was arranged, it being supported, collaterally, by deposits of Amerij can, Canadian, and oilier securities borrowed by the British Government from British investors. The British Government undertook lo pay interest on the borrowed securities at slightly better than the security rate and lo eventually return the securities to the owner, or, in the alternative, pay for them at a price agreed upon, which is better (ban the market price for the time being. There is, however, now talk of a further loan without any collaterals, which in itself indicates the growing confidence of the United States in Britain's ultimate victorious issue from the war. Business on She London Slock Exchange is once more \'vcv of any price restrictions, all remaining minimum prices having been removed on July 3 last. The New Zealand Position.

Turning nt»\v lo local concerns, i may remark that in this Dominion producers continue to experience a period of phenomenal prosperity, and our staple products are realising prices which, il may be said, have never before been obtained in the history of the country. Since early in 1915, the Dominion's meat output has been purchased in the interests of the Imperial Government on a fixed and remunerative basis as lo prices, and the arrangement has recently been renewed till the end of the war on somewhat more favourable terms to the producer. A portion of the cheese output for last season was also purchased on behalf of

the Home authorities, and arrangements have recently been made to] similarly take over the Dominion's! wool clip for the coming season. Throughout the whole country an! exceptionally favourable season has been experienced, and the yield of: every description of produce promises to be bountiful. The area of | land under crop is somewhat re-' stricted this year owing, to some exlent, to the difficulty that is being ex-' perienced in obtaining the necessary! labour to cultivate the land and har-l vest the crops and also, in a measure, to the relatively higher prices ranging for meat and wool. II is to be feared that the high : yield for meat is inducing prodi- j g.iMly in the slaughter of slock, and ] there is reason to apprehend that our flocks and herds are being re- j duced in numbers to such an extent' that the adequate stocking of our pasture lands will, in the near fu-1 ture, become a very difficult pro- j blem for our farmers. More especi-; ally is this remark true in the case of! cattle, of which class of stock a more than ordinary number of young beasts are finding their way to the | slaughter house. Lambing has gen- j erally been good for the whole coun-1 try, and this, in some measure, will compensate for the excessive drain j that has been taking place upon our! sheep stock.

The state of trade and business! throughout the country is, on the whole, good. The excellent prices; which have been realised for the past two years for our staple pro- j ducts and the large expenditure of i borrowed money that is in progress in connection with, the training and equipment of our troops for oversea service, have placed the people generally in an easy position in regard to resources, and they are displaying! the usual liberality, if not prodiga-1 lily, in the expenditure of the abun- j dant funds that they have available.; Traders in luxuries, such as jewel-1 lery, soft goods, etc., have been do-1 ing exceptionally well. Land and agency business is'fairly quiet. The: building trade is severely handicapped by the shortage of skilled labour: and the high price of materials; and operations in this industry are con-, fined mainlv to necessary works.

There is little change to chronicle in the state of the money market. Mortgages still continue to be raised and renewed at rates averaging 5i per cent, to 6 per cent., and the effect of the £8,000,000 local war loan, which the Government placed on the market in August last and which was over-subscribed, has not apparently been to harden the market to any appreciable extent, at any rate in the meantime. The cost of living is steadily increasing, and the high prices to which the necessaries of life have advanced are imposing a heavy burden on the wage-earning and small salaried classes. The Government, with a view of pacing a check on the upward tendency of the price of butter sold for local consumption, fixed, by Order-in-Council, the maximum wholesale prices at which butter destined to be retailed in the Dominion should be sold; and in order to compensate manufacturers for any losses they may sustain through selling for the local market instead of exporting, a levy at the rate (at present) of three farthings per pound of butter-fat used, was made on all butter and cheese factories, and the issue of a license to export was made dependent on the payment of the levy. The principle underlying the Government's action is a very important one both to producers and consumers, and its operation as regards butter will be watched with interest.

In sympathy with the increased difficulty of Hving decently and respectably at the present time on small salaries, the hoard recently decided to grant to the bank's officers, a war bonus of 10 per cent, on all salaries, not exceeding £SOO per annum, drawn by married men and by single men who are burdened with the support of dependents. As this bonus has been back-dated to April 1 last and is to continue at any rate till March 31 next, it will, we hope, effect a considerable relief to the lower salaried officers of our staff in the matters of ways and means of livelihood. I have no doubt that the board's action will have your cordial endorsement. New Zealand Trade.

The trade returns of the Dominian exhibit a very satisfactory position. In each of the two complete produce years that have passed since the outbreak of the war there has been a very substantial increase in the values of the Dominion's exports as compared with the previous year. To show to what extent the Dominion has benefited by the very strong demand for its staple products, I append a table of the exports and imports (excluding specie) for the two years from October 1, 1014, to September 30, 1916, and also for the two years immediately preceding the war, viz:—From October 1, 1912, to September 30, 1914: Excess Exports. Imports. Exports. 1012-1:! .. £23,<>82,41fi £22,508,.'!51 1913-11 .. 23,759,317 21,030,381 £17,441,763 £13,924,738 £3,517,025 1914-I."> .. £29,710,134 £19,780.221 1915-10 .. 34,920,541 23,791,132 £01,0.10,975 £13,577,370 £21,059,509 These figures show that the excess of exports over imports for the two pre-war years was £3,517,025, and the excess for the later period, C 21,059,599. - Turning to the figures for the year ended September 30 last, viz:—Exports £34,92(5,541, imports 123,791,152 —an analysis of the export figures shows that the increase of £5,210,107 as compared with the preceding year, is due mainly to higher values, and not to increased quantities. The fluctuations in our main products are shown in the following table:—

11 will be seen that all the principal products exported in 1!)15-1G exhibit an increase in value, though both wotil and butler show a shrinkage in quantity. Imports show an increase in value for the year or £4,004,928. This is a large increase, which in normal limes\vould call for more than passing comment, but under present conditions it is obvious that a considerable portion of the increase is due to higher values of the goods imported and the execution of belated orders. The prosperity of the country tends to encourage extravagance in cxpen-

diture and in methods of living, which in ordinary course results in increased imports; and from that point of view it is perhaps not a bad thing for the country that inward shipping facilities are in some measure restricted. The Banking Returns show an eminently satisfactory position. The combined deposits of the banks received from the public at September 80th last, compared with those of September 30, 11)15, were as follows: SrpUvnbcr 30. 1915. 1910. Incrf-a.se. Interest-bear-ing deposits £11,009.000 £12,975,f,29 £1,309,563 Non-interest bearing deposits .. 17.515.503 li, 020,071 2,071,K0S £29,151,929 L'!2.V.fj;MKI £3,444,371 (lovernment deposits show large increases, the consequence of the incoming of the local loan monevs, and the large revenues resulting from the taxation imposed under the Finance Act, 11)15. Note circulation shows an expansion of £1,507,116. This is not the result of any increased activity in the trade of the Dominion, but is occasioned by the complete suspension of gold settlements between the banks; settlements of exchanges being now made in the legal tender notes of the settling banks. Advances also show expansion to the extent of 1*1,329,0511, the figures being as follows: September :«, 19i;.. 191rt. Increase. Discounts .. £ I.:L-,7.U5:; r I.J2S.S2S £ 71.115 Advances .. 2!.<>!U,222 £23,315,'J05 £24,077,901 £1,229,059 New Zealand War Loan. In August last, the New Zealand Government, whose war requirements had previously been financed through the British Government, issued locally a war loan of t'8,000,000. The bonds were fori 4 or 25 years' currency, and the rale of interest 4< per cent., free of income tax. Applications for the loan totalled £9,558,500, of which amount the five banks doing business in New Zealand subscribed £4,000,000. Our own subscription was £2,000,00(1. Contemporaneously with the issue of this loan, the Government offered for sale at the various Post Offices in | the Dominion War Loan Certificate* jin denominations of £1 and £lO. i These certificates, which are payable | in five years, were offered at a discount, the discount representing I compound interest on the purchase : money up to date of maturity of the \ certificates. The prices of the £1 | and £lO certificates were 16/- and £8 respectively. By this means coupons for interest are dispensed with. Each investor will draw interest in one amount when the investment falls due. No limit has been placed upon the issue of these certificates, and sales are still being made. Up to November 15, £1,113,000 had been received from the sale of these certificates. The Staff. Since the outbreak of war no fewer than 369 of the bank's officers —more than a third of the total staff I —have joined the Military Forces. j The bank granted leave of absence I to 329 of these, with half-pay in the j case of members of the colonial staff I and full pay for members of the LonI don staff, the military pay of the latter being on a lower scale than that of the colonials. The remaining 40 j resigned their appointments in order to join the Army, preferring that course rather than to wait their turn i to be relieved. Of the officers on leave I regret to say that 20 have lost their lives, one is miising and believed to be wounded, and 51 others have been wounded in action. As probably less than 200 of our officers have been in the firing line, the balance being still in J camp or" in transit, this is a heavy | toll, and it can be judged, that, as a ! soldier, the bank clerk keeus well to : the fore and takes his full share of ' the fighting. You will, I am sure, join with me lin extending heartfelt sympathy to the relatives of our gallant officers ! who have willingly given their lives ! in the service of King and Country.

1 The difficulty of carrying on our | large business with a steadily weakening stall is one which is shared by practically every employer in the country, but the magnitude of our business makes our task proportion- ■ alely heavier. We have now 200 women clerks at work, and are taking on others. An efficient bank officer, however, is the product of years of experience, and he cannot be satisfactorily replaced by inexperienced clerks. Election of Directors. —Mr William i Watson is the retiring director this | year. He has given due notice that I he offers himself for re-election and. | as there is no other candidate I have pleasure in declaring him duly i elected. j The death of Mr Kennedy leaves j Mr Watson in the position of senior (director. For over 22 years he has (been continuously watching over the [bank's interests, and, having regard to his physical and mental activity. I should say that he is good for many more years of service. 1 have pleasure in congratulating him upon his ic-cleclion. Interim Dividend.—The results of the bank's work during the half-year I ended 30th September last have been | found to bo satisfactory. The prolits learned justify the usual distribution. An interim dividend of (i per cent, is •accordingly now declared in respect |of both preference and ordinary ishares. The dividend will he payable at Wellington to-morrow. Dili I inst., and at branches on receipt of ! advice. Mr W. Watson returned thanks for his re-election to the Board of Directors. Mr B. W. Kane, who was appointed on the death of Mr Kennedy, intimated his intention of being a candidate for re-election as a shareholders’ representative at the annual meeting in June next.

Quantity. lflll 15. 1!)l.Vlfi. Wool (II)...) .. .. 2:)S.!!liS,ll.s 2llll.1.;0.l7S Frozen meat itwtsi :;.:i(i8.if.t :i.ir,::,:i40 liuttcr l owls) .. .. li:!,9S7 :S95,4G0 Cheese (cwts) .. .. 792,075 970,818 Value. Wool (lbs) .. .. i.M0,i2f.,172 £1.'!.173,908 1'iozen meat ieuts) 7.2:;S.5<,0 7,589,79.-. Butter (cwts) .. .. 2,.-{8.->.:tOS 2.749,939 Cheese (cwlsi .. .. 2.52.-.,169 3,146,1-12