BANK OF NEW ZEALAND

Star (Christchurch), Issue 17410, 12 December 1924, Page 9

BANK OF NEW ZEALAND

HALF-YEARLY MEETING. ACTING-CHAIRMAN’S > ADDRESS. THE EXCHANGE POSITION. 1 (Special to the “ Star.”) WELLINGTON, December 12. The half-yearly general meeting of the .shareholders of the Bank of New Zealand was held to-day. Mr William Watson (acting-chairman of directors) presided over a good attendance. CHAIRMAN’S ADDRESS. Tn the course of his address the. chairman said : This being the halfyearly general meeting, there are no accounts to submit to you. the actual business being confined to the election of a shareholders’ representative to the hoard of directors and the dcclara- j tion of an interim dividend. The re- | tiring director. Mr Richard Maine I Gibbs, having given the hoard the required notice, and being the only can- j didate for the vacancy, j have much pleasure in declaring him duly elected The profits for the half-year ended September 30 last were satisfactory, and the hoard has accordinglv resolved to distribute £283.333 6s 8d of the amount as follows: Dividend for the full year to March 31, 1925, at the. rate of 30 per cent per annum on preferences “A” shares . . . £50.000 0 0 Interim dividend for the half-year to September 30 last, on preference “B ” shares . 33,333 6 S Interim dividend fo>* the. same period on ordinary shares—ls 4d per share . . . 200.000 0 0 £283,333 6 8 INCREASE OF THE BANK’S CAPITAL. You were informed in September last that the board had arranged to issue the balance—*£l.l2s,ooo—of the bank's authorised capital. The issue will Ik* made at par on April 1. 1925. and. so far as ordinary shareholders are concerned, in the proportion of one new share to four existing ordinary shares. The Government will receive, in the shape of preference “ B” shares, the third of the issue as specified by the Bank of New Zealand Act, 1920. The paid-up capital of the bank will stand at £5,625,000 when the new capital shall have come in.

While congratulating you on the great strength to which the bank has attained, and the gilt-edged nature of the shares as an investment. I would deprecate their being made the media of speculation, as, although the future is promising, shareholders would not bo warranted in anticipating a recurrence of all the benefits they have received within the last few years. Our advances in the Dominion show an increase of over a million for the halfyear. whilst deposits decreased to the extent of four millions. This, coupled with our inability to transfer hither a sufficiency of funds from London, has necessitated our keeping a tight handyton advances. BANK AND THE FARMERS. Tt was felt by my colleagues and myself that, in view of the exceptionally large number of applications to the Advances to Settlers' Department byfarmers for long-term loans, the bank should render material assistance to the Government in its efforts to cope with the position. These applications were, it was understood, mainly from farmers who have been taking advantage of the provisions of tbe moratorium on mortgages which expires within a few months. It does not come with the scope of sound banking practice to make long-dated advances consequently we could not directly assist that class of borrower. More over, we could not, having regard to th<? requirements of our customers spare any large amount of money for exceptional transactions. The onlv way to meet the position it seemed to us. was to arrange with the Government that the balance—£l.l2s.o9o —of the bank’s authorised capital should be issued, and the amount Jem to the Government foi use of the Ad vances to Settlers’ Department. Th Minister of Finance welcomed and accepted the proposal The loan is in the shape of inscribed stock, with a currency of ten years, and bearing interest at the rate of 51 per cent per annum. These terms are generous to the Government, and enable the Department to lend to settlers at of per cent, -without incurring any loss in interest and administration expenses. Our branch advices inform us that, the weather conditions throughout th** country have so far been very favourable this season for large production of primary product*, and. as prices upon the whole are usually high. ( there i . every prospect, of farmers substantially improving, their financial positions Jt is to be hoped, however, that recent experience will lead to the more economic use of surplus funds and ere dit than in speculation in land based on the present high prices of produce. Traders complain that business was dull throughout the winter and spring, but there are now signs of improvement.

At our last meeting T alluded to a subject- which caused some concern—viz., the deterioration ot the pastures in certain districts of the North Island. Your directors arc now glad to note tlie the Hon the Minister of Lands has appointed a Commission to investigate the matter, with the view of having it dealt with, and trust that, as a result, a policy will be adopted whereby these lands will be restore'l to their full productivity. EXCHANGE. There has been no easement of the exchange position since I addressed you iu June last.; neither is there any practical solution in sight, although many theories have been put forward. Tbe hope that the reconstitution of the State Bank in Australia would effect something beneficial to exporters has resolved itself into a temporary method very much akin to what a bank director in Sydney- proposed early this year. It was found that, owing to the restrictions of the note issue, neither tho banks nor any others in the Commonwealth could finance the heavy* exports of this season, so it was arranged that certain bauks, forming themselves into a pool, should obtain against undoubted securities a loan of £15,000,000 irj notes from the new board to cope with the pressing situation. It is difficult to see why the old note board coui.l not have done the same thing: thu- it would appear that Dr Earle Pago w as a true prophet when he said that the proposed new Act will co% work mu-

acles.” Had not the present arrangement been made, however, tt would have been impossible to estimate the extremity to which tie ratee of exchange might exwnd. and the condition of the Commonwealth might be very different from “ Advance. Austra l:a. ’ What the permanent benefit will amount to remains to be seen. Tho adoption of the method referred to has, of course, been of benefit to the primary producers of this country, for any dearer exchange charged on produce bills in Australia would compel greater discounts on drafts and telegraphic transfers to be allowed to x im porters there, and the banks in this Dominion would have to follow suit, and raise their buying rates on London as well as their selling rates on Aus tralia. Thus our importers from Australia and our primary producers would both suffer. The banks here do not require State assistance in financing tho exports and there is every probability j. a e " Zealand this season’s produce bills will be negotiated at rates of niOFe favourable to exportertnan those in Australia. To those who a£™ a L t °| b * ~eVe th3t th « «tufor nrofif en Z IUGer * d by the banks . profit-making purposes. I would Point out that, to be logical, thevmus t *’* ■ H nks >" ‘he Common. rtl . j udlng the Stat e Bank—to a yea ter degree. But the hanks are not to blame. The fact «« H banks; <- lact 15 that all the « a r J dp , rto hack to prewith the approval of critic'^' T eS - *° m T »*>le Press ‘that £ OU f‘'? d J throu Sh the sources tn th bank had ln London rehaYf n- the arnount of nine and a nnlhons, which was at least five millions more than was suitable for the conduct oi our business. At times dur ■r* the year the surplus was s“me md- . . n ex °ess of these figures. If we considered only °ur present interests we • houJd decline to purchase bills on London to add to funds there on which '?, “ n 1 b nt half the interest obtain a or Such a st. p would, however, be disastrous to clu C de l d e it S t a, l d expor,ers - we concluded it to be U! accord with our pubr? responsibility and better for the fJomiruon as a whole that all the bills should be purchased, the bank chaiging rates of exchange to cover to some extent the loss of interest. I„ thTconnection primary producers should re- , t that, while to-day exchange on London bills on demand is 2 per cent more than in J 914, average prices for wool arc SO to 100 per cent, and for butter about 50 per cent more in their favour. They should also realise that increased volume and high value.- of exports augment the funds in London, and therefore conduce to higher rates of exchange. Charges and interest loss on transmission of gold from London, even if the gold were obtainable, would now cost about If per cent. The more one studies the exchange question the more one must be convinced that it is governed by strict economic laws which cannot be penman, ently set aside. Supply and demand, imports and exports, both visible and invisible. Government and local bodies borrowing in London, and rates of interest have, with other matters, to be taken into account. While the demand for our exports is strong in Great Britain, so that the prices are high, arid while both price and volume, combined with loan money ra sed in London for transmission to the Dominion, create much greater value than that of our imports and interest disbursements, then exchange must go against the exporter and in favour of the importer. Neither tentative method nor even gold itself can in such conditions permanently ensure stability in the world's exchanger

On a reasonable estimate this country at the close of the present season should be more than ten ini’lions better off than at the commencement; therefore, if the Government requires to borrow, it should be possible to raise a loan in the Dominion without unduly disturbing local financial conditions. A somewhat higher rate of interest would have to be paid here than in London, but, on the other hand, there would be saving in exchange and in costs of flotation and administration, while the interest would remain in the Dominion. Such a course would certainly tend to steady the exchange market. Other steadying factors would be more value of imports, which, considering it a ready too great, many would deplore: and a heavy fall in the value of our exports, which none of us want to see.