COLONIAL BANK.

Star (Christchurch), Issue 5409, 9 November 1895, Page 7

COLONIAL BANK.

| MEETING OP SHAREHOLDERS. 1 THE AMATiGA.BtA.TION PROPOSALS. ; [Per, Press Association.! 1 DUNEDIN, Nov. 8. I An extraordinary general meeting of the shareholders of the Colonial Bank was held to-day. Eighty shareholders were present, the directorate being represented by the ! 1 Hon G. M'Lean (chairman), Hon W. H. ! Reynolds, Hon W. D. Stewart, Mr P. C. t Neil, and the Hon W. J. M. Larnacb. , ! The Chairman t-eid: —" We have met to consider the agreement with the Bank lof New Zealand for the sale of the ; bank's business to that institution, which . agreement has received the sanction of ! Parliament. The contract is one that does not give unmixed satisfaction to your Directors, bnt it is the result o£ long, ; anxious and tedious negotiations, and j embodies- tho beet terms they could I procure for you. It only remains for you • now to say whether you will accept or g reject it. Oao cf the main conditions that ; your Directors had in view throughout the ' negotiations waa that shareholders ehould ho released from all further liability on their share?. Oa reference to the agreement you will see that, with the exception of the 'C' list of accounts, whioh have very liberal reserves by.way of sscurity placed against them, consequently do great liability should attach to them, and the ordinary drafts nud remittances which have to rua off, and on which tha risk of any liability is remote, tbo pur- ! chasing bank ?unrantees to pay all deposits and. Other liabilities, so that 'practically shareholders are 'released from further liability." The Chairman went on to j detail the leading features of the.agreei nlenb based on tho balance-sheet as at August 31. " General advances have been subjected to the most searching investigation possible. Every advauco account in our books has been thoroughly overhauled from the largest to the smallest —firet by the' inspecting officers of the Bank of New Zealand, subsequently by the directors of that bank, and finally by tho Government Auditor. The resulb of this investigation > waa that the accounts were classified I under four headings. Thoao in tha j ' A' schedule,' amounting to .£927,197, I were taken over unreservedly; those in the '.B and CC* schedules, amounting to £703,077, 'tha directors of th» Bank of New Zealand wished to further investigate, and ponding more experience cf their working, insist upon retaining the sum of £327,305 in reserve by way of security. Here I may say that many of these accounts have not given ua anxiety, while some of them are as operative and profitable as any in the books of the bank. The assetacomprieod in the 'D' schedule include certain inoperative accounts, and amount nominally to .£102,274, whioh assets are retained by this bank for realisation. It will be Been, therefore, that the Bank of New Zealand is to take over as good, inclusive of the 'A' schedule, assets amounting to £2,195,884, lesa allow* ance on furniture and stationery, and further has agreed to take over those in 'B and 'C' schedules, amounting to £703,077, subject to realisation, against which it is to hold in hand £327,305 of tha purchase money. The total amount to be paid to you in the meantime by the Bank of New Zealand will be £2,643,190, less £2,509,284, the difference between these amountß (£133,906) being available in cash. In due course we shall also receive such portion of the £327,805 as may not tie required for deficiencies in accounts in the 'B and 'C schedules, and we shall also receive whatever amount is realised from the assets comprised in the 'D' schedule. From these several sources we hope for a substantial sum per share yet to be realised for distribution amongst shareholders, the amount of which will depend on the realisation of these accounts and the state of business in the colony until this has been done. The Bank of New Zealand Directors have said in effect: If you insist on freeing your shareholders from all liability, we must make ourselves absolutely safe. Doubtless you will all realise what a wide divergence of opinion there usually exists in the valuation of securities pending an investigation as between buyer and seller. In faot it is often impossible to Bay, short of realisation, what the valueß of certain securities are. After discussion and very close investigation of some of these securities, it may be that our officers have taken a too sanguine view of the value of such securities, considering the protracted depression and the general shrinkage which consequently has taken place in values of all properties. On the other hand, wa think the views held by the other side were, to a large extent, extreme in the opposite direction. As io the acquisition of our business, we have no doubt that its value to the Bank of New Zealand trill be more tban its Direotors estimate. They secure, next to their own, the largest exchange business in the colony, and the excellent advance business which they much require, and which in no other manner could they obtain in the present condition of the money market, except by cutting rates and taking accounts from the other banks. 3,' his, tor them, would have been a suicidal policy, for in lowering rates to customers of other banks, they would be .bound to lower their own aleo, consequently their earning power would be considerably lessened, and this would lead to a very undesirable abate of things, good for no institution in the end. Lastly, they got their raoßt formidable rival out of tha way. With the acquisition of this bank's bußineßß, and the assistance they have received from the colony, the position of tha Bank of New. Zealand will thus be remarkably advantageous. There are obvious reasons wiiich have influenced your directors in adopting the course which they have. As indicating the radical changes which have recently taken place in banking in the colonies, it may ba Btated that the dividends of other banks, some of thorn the oldest in Australaßia, have during the last few years gone down to fully one-third of what they were, and the shares of thosa banks have been selling at considerably less than one - half of the prices ruling a few years ago. But for ! the intervention of the Government of ! New South Wales tha Australian banking crisis would have extended to New Zealand, in whioh event it is difficult to conjeotnre what the consequences all round would have been. During that period some of our shareholders, seeing the calls on shares that were being made on financial institutions in Australia and here, and fearful of a like trouble coming' to them, began pressing their shares on the market to such an extentthat sales were made as low as 18s 6d, a circumstance that {adversely affeoted our credit. This nnuettled state of business, coupled with the withdrawal of deposit?, occasioned great anxiety to your directaw. As a consequence of that ctieis we have had deposits withdrawn from ns to no leas an amount than £{$32,000, whicfc naturally necessitated the restricting of our advance business, and compelled us tojeeep ourselves in a stronger position than we previously had considered it necessary to do* This, yoa mußt re* member, was indicated by me to you at tha time, and I also sounded a note of warning as to how these changes were likely to affeot our future position and profits. Were it necessary to do so now, the fact of withdrawing advances would cause little inconvenience, as plenty of money is available in other banks to take up accounts, and we should be affected only in the loss of earning power, but at that time every bank was looking to its own protection and calling in advances to meet withdrawals of deposits which ward going all round, and so strengthening thoir position. Under theae circumstances, pressing customers for money and calling it in from them weakened many accounts whioh otherwise would have been considered good, in addition to which the extraordinarily low price of all New Zealand produce prevailing at the same time placed some constituents in embarrassed circumstances who had hitherto been in satisfactory positions, and freedom from bad debts and 'depreciation in our securities was impel*

[ eible. I would like to remind you herd I that such a curtailment of business as I have mentioned means a serious blow to I the earning power of the bank, and that accounts which, when surplus profits are good, may rank in the | doubtful lint, for ample provision [ can be made for them, fall into a loner grade when the surplus profits do not come np to the necessary amount of provision required. Were it, therefore, not for the complete change that since the Australian crisis, or within the last few years, has come over the oystem of bank* ing, making it neceßsary to rely more on, paid-up capital than on deposits, the directors would not have considered it desirable to pursue the course they have done in entering into the negotiations notr under consideration. I hare now placed the whole matter before yon; In order to prevent proxies being naed contrary to the instructions or intentions of the share* holders giving them, special proxy formß wete prepared and sent to every share* holder in the colony, and plenty of time has been allowed for their return. On these forms shareholders have been specially asked to vote 'for' or ' against 'the approval of the agreement, and it is entirely for the shareholders to decide whether or not they will ratify the contraot. Should the result of the voting be to approve of the contraot, the directors and, I am sure, most of yon will part with the property with great regret and with a feeling that, being the only colonial banking institution whose entirti interests were centred in New Zealand, it has not from its beginning received that amount of support, especially, from the Government'ol the colony, which it had a right to expsct. The outcry against parting with the institution I find chiefly traceable to those who have hitherto shown no sympathy with and have little or no iutereefc in the Colonial Bank of New Zealand. (Hear, hear.) With theeo remarks, gentlemen, I beg to move the following resolution t— ' That the contract o! sale and purchase having date the 12th day of October, 1895, exeouted by and between the Colonial Bank of New Zealand as the Belling bank and the Bank of New Zealand as the purchasing bank, and laid upon the , tabla of each House of the General Assembly on the 15th day of, October, 1895, ana the sale and. purchase, thereby contracted for, be and the same are hereby ratified and confirmed.'" Mr G. Arkle seconded the resolution. Mr Keith Ramsay counselled shareholders to make the bast of a bad business. He quoted an extract from the Chairman's speech in September last year, and from a letter of the General Manager to tho Government in 1894, that the bank had managed to pay 7 per cent, to augment reserves aad maintain the bnsineßs and capital intact. He then quoted from a speech of his own in moving the adoption of a report in which he had said that he honestly believed that the bank was in as Btrong a position as ever. Despita the contrast, he strongly advocated the adop> tion of the motion. Under the circumstance! it was the only thing they could do. . The alternative, if they did not agree to tho rule, would be, as they all knew, a call— a call, perhaps, of £2 or £3 per i>hare, and there were many shareholders who were not able to pay that oall. He did not think that a call, even if it were paid, wonld save the bank. Daring the negotiations in connection with this business the credit of the bank had been nndermiued. (Hear, hear.) One of their own members, speaking in the House, referred to the bank as being as rotten as the Bank of New Zealand. Another member had referred to the bank's position in most disparaging 1 terms. Correspondent* had in the papers made all sorts of statements, and lastly they bad it in the evidence of the sale that the property wai only worth. 133 4d in the pound. He thought it quite impossible, even if a call were paid up, to undo the serious mischief that had been done to the bank's credit, and he thought the only course open to. the shareholders was to accept the inevitable, and agree with unanimity to the resolution, proposed. He was willing to admit that the Chairman and Directors had done what they thought wonld be best. At the same time he thought the whole thing a mistake. He- thought that liquidation should be carried on by some outside person, and by some person unconnected with politic*. Politics and banking did not seem to run well together, if he might judge by the experience of the Bank of New • Zealand. Perhaps it they were to inquire a little more they Would see that politics and the Colonial Bank had not run together either, and he did think that in the bank's remaining days it should be relieved from political interferencß. Mr J..W. Bain said that at a meeting a year ago the Chairman had given figures to show that the bank was the, strongest in . the colony, and from what was said it was a matter of surprise that they were there to consider the state of the bank. He went on to refer to the circular to shareholders which contained a threat of a call, and referring to the alternative of Bale he asked if the bank could not have raised a million on guaranteed preferenoa shares. He aeked if it was intended to pay that dividend or not. Then the Chairman had given them some particulars about tha £134,90.0, bub he had not said' when it was proposed to pay that to the shareholders, or if it was to be paid in full at the rate of 13s 4d, into whioh it Was divisible, or to b 9 paid, in part. He approvedof the appointment of an outside liquidator.- It wag a most seriouß thing, for the shareholders whether they were to get any thing in addition to the £184,000, or how much of that they were to Ret. The equal division would be equal to 18s 4d per share ; but in view of the contingent guarantee the shareholders might possibly not get 10s per share. He would like a distinct statement from the Chairman as to what amount was to ba paid to the shareholders and as to when it was to be paid. Meßsra Arkle, B. Watson and Captain Stewart also spoke, the last-named referring to the assurance he had received last year that the bank had more money than it could do with. . . • The Chairman : So we have more. Captain Stewart said that the directors were on the horns of a dilemma. They had been either incompetent or untrustworthy. The Hon W. J. M. Larnaoh said in the course of his remarks that he intended to vote againßt the sale to the Bank of New Zealand. The Chairman ridiculed the idea of preference shares, and pointed to the faot that in regard to Australian banks such shares had only been taken np after the doors were closed, and that they meant a heavy liability » The appointment of a liquidator would be made by the Court, but it was very necessary that he should be an expert. Failure to appoint a good liquidator might make a difference of ten shillings a share. After the castigation he had received, it would be unfair to ask him to foretell anything more; but he could assure the shareholders that every precaution had been taken, and he really believed that there would be no further liability.. 1 Meosrs W. liarron, J. Green and others asked a number or questions in reference to the possibility of f at t her liability, in reply to which the Chairman said that the future liability he had mentioned was all the liability. They had an indemnity from the B-mk of New Zealand to pay all the deposits. Ot course, there was a large amount of them that went off at once. There wan not the moßt remote possibility of any liability beyond what he had mentioned in his speech, viz., on the "C shares, and he did not think there could be any fear. Besides, they had money coming from the " D " list. On the motion being put, three hands were held up against it. On a ballot being taken the result was— For the motion 134,551, against 6115. The meeting, whioh lasted nearly two hours, then closed, ,