BANK OF NEW ZEALAND

Timaru Herald, Volume CLVIII, Issue 23347, 2 November 1945, Page 4

BANK OF NEW ZEALAND

NOW PROPERTY OF STATE

Purchase Price Of Shares No Administrative Changes (N.Z.P.A.) WELLINGTON. Nov. 1. The terms on which the private shares in the Bank of New Zealand will be acquired by the Crown were announced by the Minister of Finance (the Hon. W. Nash) explaining- the terms of the Bank of New Zealand Bill, which was introduced in the House of Representatives by Governor-General's Message at 10 o’clock to-night. The Bill was read a first time without

debate, the Leader of the Opposition (Mr S. G. Holland) indicating that his party would reserve its rights for discussion of the measure until a later stage. "The Bill,” Mr Nash said, "states it is desirable that there should be a State trading bank for the purpose of facilitating post-war reconstruction and the development of New Zealand, the rehabilitation of returned servicemen and the provision of reliable, prompt and economical banking services and, generally, for the purpose of assisting to promote the economic welfare of New Zealand.

"With this preamble the Bill provides for the acquisition by the Government of all the ordinary shares in the capital of the Bank that are registered in the Bank in Wellington. There are three alternatives for shareholders:— (1) "45/- may be taken in cash. (2) "£2/6/8 may be taken in taxfree, non-transferable 3 per cent New Zealand Government stock. (3) “£2/13/4 may be taken in 3 per cent ordinary New' Zealand Government stock which will be taxable.

“The Bill also provides for the acquirement by the Government of the D Long Term Mortgage shares in the capital of the Bank that are registered in Wellington. The price to be paid is £l/10/- in cash or £l/10/- in 3 per cent New Zealand Government stock. Tax-free, non-transferable stock is redeemable at par on 15/11/1957, or it may at any prior date be converted into ordinary 3 per cent Government stock at par. .Transfer Books Closed

“Power is taken,” said Mr Nash, “for the Government to acquire by agreement the ordinary shares or the D Long Term Mortgage shares in the capital of the Bank that are registered in London, Sydney or Melbourne at agreed prices. There is provision also for the payment of the 3 per cent interim dividend which has already been declared by the Bank. No transfer of shares as from the first of the present month will be registered by the directors unless the consent of the Minister of Finance is first obtained. No shares may be transferred from the register in London. Sydney or Melbourne to any other register.

“Provision is made enabling the Government to appoint the Secretary •to the Treasury to the board of the Bank. The existing directors are continued in office. All the rights and privileges of bank officers, whether under the Bank of New Zealand Officers’ Guarantee and Provident Association Act, 1900, or otherwise, are maintained, and bank officers will not become officers of the Public Service.” Assurance Repeated Mr Nash recalled the statement he made on behalf of the Government on March 31 last when he announced that the Government gave an unqualified assurance that all the rights and immunities now enjoyed by customers in the Bank will remain exactly as at present, that clients’ accounts and records in the Bank’s books will remain inviolable and secret, and that deposits in the Bank will continue to be governed by the same terms as govern deposits in other trading banks. In all administrative matters the Bank will remain under its present management, and the day to day conduct of its business Will, as hitherto, be governed by the principles of sound banking practice. General Policy “The general policy of the bank.” said Mr Nash, "would be determined by the Minister of Finance on behalf of the Government in accord with the like powers provided in the Reserve Bank of New Zealand and the State Advances Corporation Acts. Provision is also made for the existing directors to remain in office in accord with the Act, and they will be responsible for the general administration of the Act.” Return on Price Mr Nash said the second alternative offered shareholders, that of £2 6 8 in tax-free stock, would give exactly the same return as was obtained at present with the 7 per cent dividend. The period of this stock -was 12 years. There had been some discussion in regard to making the period longer. The £2/13/4 taxable stock would also give a like return to that now obtained. It would bring in a return of £B, but with the reduction of £1 for social and national security tax the amount would be exactly the same as under the present dividend, except that the stock was taxable, whereas dividends were non-taxable. There was provision to enable shareholders who did not pay high taxation to obtain the same net income as before. Mortgage Shares With regard to D long term mortgage shares, Mr Nash said they were unique and carried a dividend of 71 per cent which was subject to national and social security tax, reducing it to £6/11/3. That could not be compared with the ordinary shares because they were subject to redemption at par by vote of the ordinary shareholders. Owned by the People Mr Nash said the first payment in connection with the stock issued for shares would be made on May 15 next year. The bank, in effect, belonged to the people of the Dominion now as the Bill was operative from to-day. The reason behind that was to stop speculation in shares. Shares belonged to the holders of them on October 31, but no transactions in shares would be allowed after that date. Replying to Mr Holland, Mr Nash said the existing directors had agreed to remain in office. Mr Fraser, replying to Mr Holland, indicated that the second reading debate could proceed next Wednesday or Thursday.

Letter to Directors Mr Nash read to the House letters which had been exchanged between himself and the Board of Directors ill regard to the, acquisition of the Bank s shares. Mr Nash’s letter addressed to Mr Donnelly, chairman of the Board, bore to-dav's date, and read: “Dear Mr Donnelly.—Following the discussions held between Mr Chalmers. Mr Porter, yourself and myself, and, subsequently, between Mr Paterson. Mr Dawson, yourself and myself, I am writing to advise you that it is proposed this evening to submit to Parliament a Bill empowering the Government to acquire the interests of the private shareholders in the Bank. Attached hereto you will find a copy of the Bill in which vou will note that it is set out that the price to be paid is based on the maintenance of tile present net income of shareholders for a fixed term of years. “From our discu '-ions I understand the Board agrees that the price and terms from th? maintenance of income point of view are fair and satisfactory, but that there is not complete aereement aim.in.’ mem':■: of the Board on (.he fairness of the capital value oi the stock proposed to be issue a to !i.a< holders. Il lias been emnli i ised that tile proposals in th Bill nitride lor compulsory aciini tit rm and that the price is arbitral ilv fixed bv the Government, di regarding the cont.ent ions of the . iiareholdcrs' commit! ' ■ th if I lie a.-. : I , val ic of the Bank is Hie onl’ t 'it .nr,rare of the email se j.ri'i 1 . II i, al o stated Hint the compiilr.orv acquisition is the same thing

as liquidation, and on liquidation the shareholders are entitled to the full present value of the -assets. “In the course of the discussions it was mentioned that the point of view of the shareholders' committee might in some degree be met if the original

proposal of the Government to provide a tax-free stock period for 10 years was extended to 15 years. Following on consideration of this proposal by the Government, the Bill has been amended to provide for a period of 12 years.

"In accord with the statement made by myself on March 31 last the Government desires the present Board of Directors to continue in office. In all administrative matters the Bank will remain under its present management. and the day-to-day conduct of the business of the Bank and employees’ conditions will be governed by the same principles as have been adopted in the past. “In regard to your report to the annual general meeting of shareholders I have noted that you stated at that time that you would like to be relieved of your appointment when the Bank was taken over. I also understand Mr Paterson at the same time said, in effect, he was willing to remain on the Board as long as he was able to serve the present or future interests

of the shareholders. The Government would appreciate your continuance in office arid while I cannot at the moment make any firm undertaking. I am recommending to the Government that Mr Chalmers should be appointed to the vacancy on the Board, and consideration will be given by the Government as to whether it is expedient at present for the Secretary to the Treasury also to be appointed. It will be understood that if the directors decide to continue in office they will be free to retire at any time, and that if any action is taken "by the Government with which you or other members of the Beard feel it would be impossible to agree, the Government recognises it is within your right to reconsider your decision to continue in office.

“There are one or two arpendments to-the Bill as now presented compared with the text when the matter was discussed, but I understand the amendments are acceptable. “May I in this letter say how much I appreciate the helpful attitude shown by yourself and other members of the Board in the discussions on the principles and provisions of the Bill. From the inception of these discussions I have recognised that the Board, while watching the interests of the shareholders, has been primarily concerned to ensure that the policy of the Government, when determined, should be carried out in the most beneficial way for the Dominion and with the least disturbance of the finar.cial structure.” Chairman’s Reply Mr Donnelly’s letter to Mr Nash stated:— “I received your letter of November 1 which has been considered by the Board to-night. I have to thank you on behalf of the Board for the generous reference you have made to the attitude of the Board during our recent discussions.

“Referring to the terms of your letter the Board agrees that the price anfi terms from the maintenance of income point of view are fair and satisfactory. You have fairly stated in the second paragraph of your letter the contentions of the Board that the capital value of the stock is lower than

it should be. We note you have partially met our request that the term of the tax-free stock should be extended from 10 to 15 years. We strongly urge upon you and the Government that the matter should be reconsidered and the term extended to 15 years. Even that period would not compensate the shareholders of long standing.for the capital loss they must make on the maturity of the stock. -We iiote and accept the statement in your letter reaffirming your statement of March 31 that the business of the Bank will be conducted in future on the same principles as in the past We have given anxious consideration to the nroposal of the Government contained ’in * the Bill that the present Board should continue in office. As you will know from our discussions with you. Mr Paterson. Mr Dawson and I would prefer to retire if we consulted our own wishes and personal interests. After giving the matter most careful consideration we are agreeable in the present circumstances to continue in office in order to preserve as far as possible the business and integrity of the Bank in the interests of the country as a whole. “We note with aouroval that without vow mal’ine (inv brm undertaking you will recommend to the Government that Mr Chahne rc: should be annointed to thn Board. would welcome Mr Ashwin has a colleague, and we think his annointmert world be an imnortant contribution to the national stability durin? the difficult times that are ahead of us.” Account Withdrawn (N.Z.P.A i NEW PLYMOUTH. Nov 1. 3 In- withdrawal of its account! Iron’ the Bank of New Zealand as a protest against the nnnouncenvnt that it 11 ’c’ils Io raticnclise the b: nk was derided by the Tata: Chamber o' Commerce at New Plymouth to nigh' q • chairman <Mt M. S Hu hsont ■ :ij I if the Chamber did not adopt this coms" it would be failing to show the courage of its convictions.