BANK OF NEW ZEALAND.

Star (Christchurch), Issue 5356, 6 September 1895, Page 3

BANK OF NEW ZEALAND.

♦ THE ADJOURNED MEETING OF SHAREHOLDERS. LPee Press Association. I WELLINGTON, Sept. 6. At the adjourned meeting of the Bank of New Zealand. shareholders this afternoon, the President said:— -You have had the balance-sheet of the bank in your hands for the paat week, and are doubtless aware of the full particulars of the Bank of New Zealand and Banking Act 1895, which has just become law. Into the figures of the balance-sheet I need hardly enter, beyond saying that it is pro-, posed now, in addition to the entries required by the Act, to write off the reserve fund, £45,000, and the balance of profit and loss account, £383, bo ae to reduce the item "bad and doubtful debts" to £376,900, tbeamo\m% to be written off as provided by the <Act. As many shareholders may not see the Apt itself, or although seeing it may not be able to apply its provisions to the circumstances of the bank so as to form a correct conclusion, I take this opportunity of plaoing on record the provisions of the Act, and the exact position in which it will leave the bank. In the first place, then, the paid-up capital of .£900,000 and the proceeds of the call of £3 6a 8d per share, payable this year, are written off. To replace these by way of capital the Government is to subscribe for £500,000 preferential shares, bearing interest at the low rate of 3& per cent. These shares may be repurchased by shareholders at par within the next six years. . . Shareholders are called upon to pay another £3 6s 8d per Bhare, in four half-yaarly- instalments beginning on June 30 'next year and ending on Deo. 31, 1897: This will be share capital, and it is stipulated that out of the net annual profits . of the bank, after the payment of £50,000 to the Assets Board, 5 per cent interest on these shares will go to the shareholders for the present; and in the event of no deficiency remaining on account of properties removed from the bank, the whole of the profits of the institution will be payable to the shareholders. In any event, no farther call can be made until after Deo. 31, 1898. £1,000,000, invested . according to the Bank of New Zealand Share Gnarantee Act of 1894, is freed for use in the bank's ordinary business. The Government appoints one director of the bank, while the liability on the part of the colony subsists.. The whole of the stations, stock and implements, and other landed properties in New. Zealand, including the properties of the Auckland Agricultural Company, and the Estate Company's shares in the Thames Valley Land Company, are to be sold to a corporate body termed the." ABBets Realisation Board," for the price of £2,731,706, and such additional sum as may be neoeßaary to adjußt the accounts after March 31. This sum represents tbe book values of these properties, and this incubus on the assets of the bank and the Estates Company, will now . be replaced by debentures ,of the Assetß Board, bearing 3£ per centinterest, and having any deficiency upon them guaranteed by the colony. By this transaction the balance-aheet of the Bank of New Zealand Estates Company will be reduced to small .figures, and the position, of the company will be rendered thoroughly sound, * while its liquidation and. total extinction in a very Bhort time Will be feasible. The amount to be written off as. bad in the books of the Estates Company will be £467,100, against which no assets exist, and £296,500 to bring down the remaining assets to their proper realisable values. The present deficiency in the assets to be take-over by the Assets Board is computed at £850,000. With good and economical management on the part of the Assets Realisation Board, and an increase in the valueß of wool and other products, of which there is every likelihood, this deficiency might be made to disappear; and the capital and goodwill of the bank, wnich will now, be very valuable, would be then the free property of the shareholders in time. To secure the above deficiency, the colony is to have a lien upon the shared holders' capital and the uncalled reserve liability. The Assets Board is to consist of three persons, two to be appointed by the Government and one by the directors of the .bank. Power is given to the bank to purchase the business of any other bank doing business within the colony, but so that only the sound business of such bank shall be taken over, and that the selling bank will have to liquidate its own bad and doubtful debts. It ie estimated'thafc by such purchase the Bank of New Zealand will bt enabled to pay the shareholders regular dividends of 5 per cent per annum and contribute materially to the reduction of the deficiency ' of the Assets Realisation Board. The Act further provides that whilst the liability of the colony exists, the shareholders are not to wind up or dissolve the bank so as to cause a loss to the colony; and the Government, through the. president, has the power of vetoing, such proceedings as might be considered detrimental . to the interests of the colony. These are the principal changes broaght about by the Act. Their effect will be to separate entirely from the bank and free the creditors of the bank from ' >ny. risk attending the large mass of properties, Btahding in the books at nearly £3,000;00p of money, which have so weighed down the bank during the past ten years. Had the directors of the bank known when the Bsnfc of ' New Zealand Estates Company, Limited, was incorporated that the prices of wool and other produce would fall bo low as thoy have done, they would probably never have incorporated the company at all, but would have taken other measures at that time. Had prices not fallen it is probable that the deficiency with which we are now dealing would not have been so serious .as to warrant the present measures. I would ask those whose first impulse would be to impute blame,' to consider what the values of properties were ten years ago, and what they are now, and to remember that the shareholders of nearly every important financial institution doing business principally in the colony, have suffered severely, and in many instance* have not only had to pay calls, but have completely lost their properties. On Feb. 7 last, in this place, I stated to you that it was not contemplated that any further amount of reserve liability should be called up. At that time we had probed into the affairs of the bank, but were unable to ascertain the position of the Estates Company until the accounts of the head office were re* moved from London to the colony, and until we could Btrike a balance-sheet for the year ending March 31 last. By the Share Guarantee Act, 1894, the direotors and auditors of the bank were enjoined to treat the item of £1,850,000, shares in the states Company, at par value. On ascertaining the result of the working of the Eatatea Company for the year ending March 31 last, and on becoming aware of the whole actual position of the Estates Company and the Auckland Agricultural Company, it was apparent that under the system then existing the Estates Company was unable to pay interest on its indebtedness to the bank, and that if the prices of produce did not rise very considerably, yearly deficiencies would accrue which we Bhouldnot be justified in concealing from the shareholders. Had we merely come to this meeting with tidings of deficits, the credit of {the bank would be gone, and the bank itself would soon follow it. We did not consider it our duty to throw up our hands in Buch v way, but we- represented the position to the Government, Parliament having already assisted the bank by a guarantee of £2,000,000, and we aßked for reasonable assistance in the interests both of the colony and the shareholders. Then a joint committee of both Houses was set up to inquire into the affairß of the bank. Tfiis committee, while being careful not to destroy the confidence of customers of the bank by probing into individual aocountß, made a moßb careful investigation of the general business and affairs of the Estates Company, and aßked the directors, to put

forward their recommendations as t< what should be. done to rehabilitate th< bank. Thereupon the directors recommended a scheme, in moat respectß similai to that subsequently adopted by the committee in its report. The most important alterations made by the committee were that, instead of £1,000,000 preferential sharea being subscribed for by the Government, only £500,000 should be subscribed, and that instead of the shareholders having issued to them deferred shares, which they would be able to deal with in lien of capital written off, and.hypothecating the whole £6 13d 4d against any deficiency on estates, the committee reported that there should be a call of JB3 6s 8d per share, to be tcrned into capital, dividends on which up to 5 per cent, after payment of £50,000 per annum to the Assets. Realisation Board, should, it earned, be paid to the shareholders, and thab tbia capital,- tcgether with the remaining £3 6s Bd, Bhould be secured to the colony for any deficiency on the aeseta realisation. Thus, had the directors' recommendation been carried out, no call might have been necessary. We consider, however, that the shareholders should be grateful for what the committee recommended, and for what Parliament has given effect to. Had the bank been allowed to go into liquidation, the shareholders would undoubtedly have had promptly to pay the whole of the reaerve. liability, or as much of it as they individually could. New, there is only one-half of the reserve liability to pay ; and spreading the payments over two years, commencing nine moathß hence, will be agreeable to those who are not in affluent circumstances, while both to them aud.to thuße who are rich there is the consolation, that on the payment* there is every . probability of their getting 5 per cent ,iuterest, besides having, under favourable circumstances, the good-will of an enhanced business preserved to them by Act of the Legislature. The position of the bank as regards its creditors is rendered as Becure and Btrongaß that of any institution doing business south of fbe Equator, and the position being now thoroughly ascertained, shareholders may well look forward with confidence and hope. The prospects of the colony with which the bank is so much bound up, are brightening. Wool and other products are advancing in price, and when it is taken into ace .mat that Id per lb rise in wool alone will mean £12,000 per annum to the Assets Realisation Board, it will be seen how important any riße in price must be. The active development of the mining industry which is taking place both in the Thames and Coromandel districts and on the- West Coast of the South Island, cannot fail to enhance the profits of the bank. . .