PROFITS AND DIVIDENDS

Taranaki Daily News, 16 October 1930, Page 13

PROFITS AND DIVIDENDS

NATIONAL BANK’S POSITION. ACTUAL RETURN TO INVESTORS. Considerable criticism has been made lately of banking profits, and inquiry of ope local bank, the National Bank of New Zpaland, Ltfl., whose business is confined solely to New Zealand, elicited information from the general mupager (Mr. J. T- G’' ose ) t-o G le effect that tlie dividend of 12'ppr cent, distributed ip Jply last was on the paid-up capital of £2,000,000, but for tho year

to March 31, 1930, shareholders’ funds employed in the business were:—Paidup cgpjtal £2,000,000, reserve fund £2,000,000, balance of profit and loss account carried forward £153,000, in all £4,155,000, however, the 12 per cent, dividend paid was equal to only 5.77 per cent. The reserve fund of £2,000,000 consists, to the extent of £1,387,500, of funds actually contributed by shareholders by way of premiums on new issues, and the balance is from undistributed profits.’ Frorp 1885 to 1897 the dividend distributed by the bank did not exceed 5 per cent, on the paid-up capital. Between 1906 and 1926—both years inclusive—the bank made eeven new capital issues, all at a premium, which premiums make up the £1,387,500 (or 69 per cent.) of (he published reserve fund of £2,000,000. Fur the last thirty years the dividend distributed to shareholders has not. exceeded 7 per cent, on their own funds in the business. It is held by the bank that this is but a moderate return on such an investment. For more than twenty years shareholders received not more than a 5 per cent, dividend, and the return tjiey are now receiving, that is, interest at a rate a little less than 0 per cent, per annum, is not considered to be excessive. This reserve fund, which is invested in Government securities, is used in the business of the bank; and with the carry-forward and internal reserves constitutes a most substantial security to depositors, as is righjj. The shareholders are large in number 1 , but th- average holding of shares is small, as is common to all the banks.