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1946 NEW ZEALAND

BANK OF NEW ZEALAND ANNUAL REPORT OF THE BOARD OF DIRECTORS FOR THE YEAR ENDED 31st MARCH, 1946, AND BALANCE-SHEET AT THE 31st MARCH, 1946

Presented to both Homes of the General Assembly pursuant to Section 15 of the Bank of New Zealand Act, 1945, and Section 24 of the Bank of New Zealand and Banking Amendment Act, 1898

To the Right Hon. the Minister of Finance. The Board of Directors presents hereunder the report on the operations of the Bank of New Zealand during the financial year ended 31st March, 1946. Profit and Loss Account and Dividend The profits, after providing for expenses of management, and for all bad and doubtful debts, and other contingencies, and after making £ s. d. provision for the annual donation to the Provident Fund, are .. 394,079 3 8 To which has to be added : Balance brought forward from last year 359,722 6 8 753,801 10 4 From which has been paid— £ s. d. Dividend on preference A shares .. .. 43,750 0 0 Interim dividend on C long-term mortgage shares 6,152 610 Interim dividend on D long-term mortgage shares 15, 380 17 2 Interim dividend on preference B shares .. 18,750 0 0 Interim dividend on ordinary shares .. .. 112,500 0 0 196,533 4 0 Leaving available for distribution .. .. .. £557,268 6 4 I—B1 —B 15

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This the Directors propose should be disposed of as follows — Dividend on C long-term mort- £ s. d. £ s. d. £ s. d. gage shares at 6 per cent, per annum .. 7,031 5 0 *Reduced by Id. for every lOd. or part thereof .. 703 2 6 6,328 2 6 Dividend on D long-term mortgage shares at 7\ per cent, per annum .. 17,578 2 6 *Reduced by Id. for every lOd. or part thereof .. 1,757 16 3 15,820 6 3 Dividend on preference B shares (making £43,750 for the year) .. .. .. .. 25,000 0 0 Dividend at rate of 4 per cent, on ordinary shares (making £262,500 for the year, equal to 7 per cent.) .. .. .. .. 150,000 0 0 Leaving balance to be carried forward .. .. 360,119 17 7 £557,2-68 6 4 Such dividends to be paid in New Zealand currency. * Reduction on account of New Zealand social security charge and national security tax in pursuance of section 9, Finance Act, 1941 (No. 2). The gross profit for the year amounted to .. £2,099,046 an increase of £122,565 Expenses amounted to .. .. £1,704,967 an increase of £107,373 Leaving net profit as above .. .. £394,079 an increase of £15,192 The main items making up the increase in expenses are — Salaries and allowances : Up .. .. .. .. £90,500 General expenses :Up .. .. .. .. £10,340 Rates and taxes : Up .. .. .. .. £6,187 As has been the case of late years, profits have benefited by the release of reserves for bad and doubtful debts not now required, and this year a large portion of the increase in gross profit is accounted for in that manner. A reduction in investment interest has been made up by an increase in overdraft interest received. Balance-sheet Deposits: Fixed and Free. —These at £62,141,569 show a further increase this year of £4,394,499, which is reflected in corresponding increases in our assets under the next two headings. The subjoined graph is of interest as showing the expansion that has taken place in our deposits during the war years. (The graph also shows the movements in advances and investments.) The increase in deposits is accounted for by the heavy excess of exports over imports for the past year, and the consequent accumulation of overseas funds in the hands of the Reserve Bank. Importing is still restricted, partly owing to inability of exporting countries to supply goods under order, but also to continuation of New Zealand's import control policy. With the coming into operation of the various international schemes for freeing world trade, the position may be expected to improve and a better balance achieved. Coin, Reserve Bank Notes, and Deposits with Bankers. —£20,262,116, as against £17,100,465 last year, an increase of £3,161,651, which is the corollary of the increase in deposits. The main increase is in our deposit with the Reserve Bank, which at 31st March stood at £15,274,493. The Reserve Bank pays no interest on trading-bank deposits with it. These funds are, of course, immediately available, and the large surplus of £11,800,874 over and above our statutory deposit (£3,473,619) makes our position very liquid. The fact that we are unable to make profitable use of so much idle money is unfortunate.

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Money at Call and Short Notice, Government Securities, and Other Securities in L0nd0n.—£10,490,868, an increase of £1,881,927. This item includes British Government securities in which the Bank's Reserve Fund, £3,575,000, is invested. The Bank has substantial commitments and contingent liabilities against these funds. Nevj Zealand Government Securities, £13,744,149. This item shows a reduction of £1,799,531, accounted for by the repayment in March last of £500,000 free-of-interest loan to the Government for the duration of the war and six months thereafter, and of £1,300,000 New Zealand Government National Development Loan which matured in July. As a matter of policy, the Government is not at present accepting loans from the trading banks. Australian Government Securities, £1,089,953 ; Fiji Government Securities, £50,000. — There was no change under these headings during the year. Municipal and other Local-body Securities, £1,466,695, shows a reduction of £66,227, due mainly to payment of instalments of amortization loans. As explained to the shareholders last year, it is the policy of the Government to restrict the subscribing by the banks to fresh local-body loans. Other Advances and Securities and Debts due to the Bank (after deducting Provision for Bad and Doubtful Debts), £24,100,541; Bills discounted, £598,014, show a total increase of £1,203,619. The small upturn in these items, which are the main sources of the Bank's income, recorded last year has been continued—the net increase, however, being slightly less this year. Trading conditions generally during the year have been difficult owing to the continued world-wide shortage of consumer goods. This has naturally militated against a general increase in advances to traders, and until conditions' improve to such an extent that goods are in more ample supply, no great increase in advances in this direction can be looked for. There are signs, however, that the tremendous drive being made in Great Britain to increase exports will shortly produce results and have a beneficial effect on the economy of this country by increasing the amount of goods available for sale and thus providing an outlet for the large amount of idle capital. As the effects of this

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are felt, traders will no doubt require more accommodation from their bankers to care for the heavier stocks they will require to carry. Reconditioning of plants, enlargement of premises, and the large arrears generally of building are all potential avenues for the increase of advances. A number of overseas manufacturing concerns have decided to establish branches of their factories in New Zealand. In some cases the necessary capital is provided from overseas entirely, in others local capital has been raised to supplement that provided by the parent concern. The Bank has obtained a fair share of this business and is assisting by providing working capital by way of overdraft. The resultant expansion of urban industries must have a beneficial effect on employment. In fact, there is at present a shortage of labour. There has been a steady repayment of bank loans to farmers through the operations of the Government in purchasing farms for rehabilitation of servicemen. These purchases being for cash result in the release of large funds, and when a bank loan is involved the bank's advances show a corresponding reduction and there is also an increase in deposit liability, representing the equity, with an increase in the amount of qash on deposit by the Bank with the Reserve Bank. Drought Relief Owing to the drought this year, which affected farming lands in the northern half of the North Island, the Government realized that many farmers would not be in a position to carry on unless afforded some extra financial assistance. The majority of farmers are happily in a position to arrange their requirements in this respect through ordinary lending channels, but it was found that others were not so fortunate. To cover such cases, the Minister of Finance arranged that the bank, when satisfied that accommodation which could not be obtained otherwise, was necessary, should make advances to enable farmers to—(1) Purchase additional fodder : (2) Cover replacement of stock next spring : (3) Cover living and operational expenses until next season : (4) Purchase fertilizers essential to the maintenance of pastures (if absolutely necessary). Such advances, bearing interest at 3 per cent, per annum, are individually limited to £2OO, and it is intended that they be liquidated by orders on dairy companies, covering, in most cases, a period of two years. In view of the pressing necessity to assist farmers in real need and set them on their feet again, so that production can be maintained, the Government has agreed to indemnify the Bank against loss on these transactions. This method of dealing with disaster relief is a new departure, as hitherto the banking system has not been used in this connection. Though the actual loans are made by this bank, the other trading banks have co-operated. It is hoped that the method adopted will prove satisfactory and possibly more expeditious and flexible than former methods. Finance foe Private-house Building In order to assist in relieving the acute housing shortage, various local bodies have obtained empowering legislation authorizing them to enter into arrangements with financial institutions under which such local bodies are enabled to guarantee advances on newly constructed residences in excess of the usual trustee limits or limits otherwise imposed by statute. Advances guaranteed in this way provide suitable investments for the long-term mortgage department of the Bank, and arrangements have been completed whereby the Bank will participate in the schemes inaugurated by the Auckland and Wellington City Councils and the Masterton Borough Council. Although the business so far entered into under these arrangements is small, it is anticipated that it will assume greater proportions whenever the schemes beeome more widely known and adequate supplies of the necessary materials for the erection of dwellings become available.

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Shareholding Under the Bank of New Zealand Act, 1945, all the ordinary and D long-term mortgage shares in the capital of the Bank registered in the share register kept in Wellington were deemed to be vested in His Majesty the King as from Ist November, 1945. The Act also empowered the Minister of Finance to buy, on behalf of His Majesty, any ordinary or D long-term mortgage shares registered in any of the branch registers kept by the Bank in London, Sydney, or Melbourne, at such price and upon such terms as may be agreed upon by the Minister and the vendor. The position now is that all the ordinary and D long-term mortgage shares previously held in New Zealand have become the property of the Crown, and the remaining shareholders on the overseas registers have been reduced to a very small proportion by sale of their shares to the Crown. Under the Act, all shareholders' rights are exercisable by the Minister of Finance, and the remaining overseas shareholders have therefore no rights beyond the receipt of dividends. In view of the considerable opposition throughout the country to the passing of this legislation it was inevitable that the Bank would be faced with the loss of a certain amount of business. This has taken place, and we regret that some of our old and valued mercantile and farming customers have seen fit to close their accounts. Notwithstanding this, and due to the efforts made by all members of the staff, the business of the Bank continues to show steady progress. This is indicated in the accompanying graph, which shows the percentage of increase in accounts during the past seven years.

Board of Directors Section 11 of the Bank of New Zealand Act, 1945, provides that the Board of Directors of the Bank shall consist of not less than five and not more than seven persons to be appointed by the Minister of Finance. Subsection (6) provided that the Directors in office on the commencement of the Act, whether appointed by the Governor-General in Council or elected by the proprietors, should be deemed to be appointed for the terms for which they were respectively appointed or elected. At the date mentioned, the

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Board consisted of Messrs. A. T. Donnelly (Chairman), F. W. Dawson, John Dowgray, and Stronach Paterson. Subsequently, Mr. H. R. H. Chalmers was appointed a Director as from 12th December, 1945, and Mr. Chas. S. Hay a Director as from Ist April, 1946. The terms of appointment of Mr. Donnelly and Mr. Dowgray were renewed for a further three years from Ist April, and Mr. Donnelly was appointed Chairman and Mr. Chalmers Deputy Chairman. Our local Directors in London, Melbourne, and Sydney have remained unchanged, except that Mr. S. E. Wilson has joined the Board in Sydney. The Board wishes to place on record its appreciation of the services of our local Directors. Premises We are maintaining our premises in good repair, as far as it is possible to do so under present conditions of shortage of labour and materials. At some branches, owing to increasing business, our branch premises are cramped for space, and it has been necessary to have interior alterations made in order to provide more space for the public and increased working space for the staff. New premises are in course of erection at Otahuhu and Alexandra, and the Feat'herston building, which was extensively damaged in the earthquake of some years ago, has been remodelled and will shortly be reoccupied. Many of our branch premises are due for rebuilding, but because of the war it has been necessary to postpone this work. For instance, plans were prepared for new premises in Sydney, Rotorua, and Queen Street, Auckland. When war was declared it was thought advisable to postpone the commencement of these buildings, but the rebuilding of the Auckland premises is now urgent. The accommodation in the present building is quite inadequate for the volume of business transacted, and the large staff is working under very trying conditions. There is also a serious shortage of office accommodation in Auckland, and provision has been made in the plans for several floors to be made available as office accommodation to lease to tenants. The Government has recently decided to grant permission for the building to be proceeded with, their decision being influenced by the fact that it will provide much-needed letting space for offices. It has been stipulated that returned servicemen are to be given priority as tenants. The building will be put in' hand as soon as possible, and it will be a worthy addition to the business premises of Auckland. The erection of new premises at several other points will be gone on with as soon as the building position becomes easier. Branches No branches were opened or closed during the year. Agencies With the return to duty of a number of our staff discharged from the Forces, we have during the past year been able to reopen thirteen of the receiving agencies, which were closed as a war measure. We have also established three new agencies during the same period. Agencies Re-opened.—Oamaru North, Dominion Road, Balfour, Riversdale, Birkenhead, Ellerslie, Riccarton, Little River, Sanson, Mount Maunganui, Avondale; Hari Hari, Miller's Flat. New Agencies established. —Upper Hutt, Taupiri, Tokoroa. Staff At the 31st March, 1939, prior to the outbreak of the war, the working staff of the bank consisted of — Men .. .. .. .. .. .. 1,519 Women .. .. .. .. .. 74 Total .. .. .. .. .. 1,593

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As the war progressed, more and more male members of the staff joined the Forces, and were replaced by women clerks, and by 31st March, 1943, the staff consisted of — Men .. .. .. .. .. 1,577 Less serving with the Forces .. .. 737 B4O Women .. .. .. .. 713 Total .. .. .. .. 1,553 Since that date, and more particularly during the past year, nearly all the male members of the staff have been released from the Services, and at 31st March last the position was — Men .. .. .. .. .. 1,448 Less still serving with the Forces .. 191 1,257 Women .. .. .. .. 486 Total .. .. .. .. 1,743 It will thus be seen that the staff position has nearly returned.to normal and there should now be no difficulty in meeting the requirements of a full banking business. It is, of course, expected that the number of women clerks employed will, for various reasons, show a steady decline. It has also been found that a certain number of returned soldiers have chosen to abandon a banking career—no doubt attracted to other walks of life after their experiences in the Forces. Those who have resumed with the bank are settling down steadily to their respective duties, and every consideration is being given them by the Bank to enable them to equip themselves with a knowledge of their profession after the enforced interruption during the war years. ' Especially is considerable care being given to the training of the more junior members who were called to the colours while still inexperienced youths. The total number of officers who served in the Forces, either abroad or at home, was 921, and of these I regret to say that 54 made the supreme sacrifice. Naval, Military, and Air Force decorations and awards were gained by 40 members of the staff. Last year it was mentioned that proposals had been made to the Director of Stabilization to improve the remuneration of the staff by bringing salaries more into line with the higher cost of living and the rates of remuneration paid in comparable occupations outside. A satisfactory arrangement was come to, and an improved scale of remuneration for both male and female employees was adopted. London Staff This year the needs of the London staff have been given special consideration. Besides granting increases in salaries on a generous scale, it was decided, as a mark of appreciation of their splendid services during the difficult and often dangerous years of the war, to grant a special Victory bonus of 10 per cent. It was a special source of pride to us that our London office never left the city, and, except for a brief period when the office became unhabitable owing to damage by bomb blast, our staff remained for the whole period of the war at No. 1 Queen Victoria Street. The Board wishes to once again place on record its high appreciation of the excellent services rendered during the year by the staff in New Zealand, Australia, Fiji, Samoa, and London. It fully appreciates that the work entailed on those members of the staff who remained at their posts during the war has been of a very onerous nature, and the fact that the business of the Bank functioned so efficiently is a tribute to their work and enthusiasm. For and on behalf of the Board of Directors. A. T. Donnelly, Chairman, Head Office, Bank of New Zealand, Wellington, 24th May, 1946,

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BANK OF NEW ZEALAND Incorporated by Act of the General Assembly, 29th July, 1861. Authorized Capital £ s. d. Preference A shares —500,000 at £1 .. .. .. .. 500,000 0 0 C long-term mortgage shares —468,750 at £1 .. .. .. 468,750 0 0 D long-term mortgage shares—937,soo at £1 .. .. .. 937,500 0 0 Preference B shares —1,375,000 at £1 .. .. .. .. 1,375,000 0 0 Ordinary shares —3,750,000 at £1 .. .. .. .. 3,750,000 0 0 £7,031,250 0 0 Capital Subscribed and Paid-up £ s. d. £ s. d. Preference A shares .. .. .. .. .. 500,000 0 0 C long-term mortgage shares .. .. .. . .. 234,375 0 0 D long-term mortgage shares .. .. .. .. 468,750 0 0 Preference B shares .. .. .. .. .. 1,375,000 0 0 Ordinary shares .. .. .. .. .. 3,750,000 0 0 £6,328,125 0 0 Reserve Fund .. .. .. .. 3,575,000 0 0 Undivided profits .. .. .. .. 360,119 17 7 3,935,119 17 7 £10,263,244 17 7

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BANK OF NEW ZEALAND Balance-sheet at 31st March, 1946 Liabilities £ s. d. £ s. d. Assets £ s, d. £ s. d. Capital— Coin, Reserve Bank notes, and Preference A fully paid £1 shares 500,000 0 0 deposits with bankers.. .. 20,262,116 4 0 C long-term mortgage fully paid Government notes : Common£l shares .. .. . . 234,375 0 0 wealth, Fijian, and Samoan D long-term mortgage fully paid Administration .. .. 187,398 10 0 £1 shares .. .. .. 468,750 0 0 Balances due by other banks .. 520,012 4 4 Preference B fully paid £1 shares 1,375,000 0 0 Money at call and short notice, Ordinary fully paid £1 shares .. 3,750,000 0 0 Government securities, and other 6,328,125 0 0 securities in London .. .. 10,490,868 2 9 Reserve Fund (invested in British Bills receivable in London and in Government securities) .. .. 3,575,000 0 0 transit .. .. .. 169,701 8 5 Deposits .. .. .. .. 62,141,569 7 2 New Zealand Government securities 13,744,149 9 4 Balances due to other banks .. .. 15,750 0 4 Australian Government securities 1,089,953 8 6 Bills payable and other Liabilities Fijian Government securities .. 50,000 0 0 (including provision for contin- Municipal and other local bodies' gencies) .. .. .. .. 5,029,653 5 9 securities .. .. .. 1,466,695 11 7 Provision for taxes .. .. .. 760,000 0 0 Remittances in transit between London Office acceptance under branches .. .. .. 4,317,772 12 2 credits .. .. .. .. 14,723 17 4 52,298,667 11 1 Transfers from long-term mortgage Bills discounted .. .. .. 598,014 18 0 department .. .. .. ~. 114,496 11 9 Other advances and securities and Balance of profit and loss .. .. 557,268 6 4 debts due to the Bank, after deducting provision for bad and t doubtful debts .. .. 24,100,541 1 0 Landed property, premises, &c. .. .. 821,514 1 3 Liabilities of customers for acceptances, per contra . . .. .. 14,723 17 4 Long-term mortgage department .. 703,125 0 0 £78,536,586 8 8 £78,536,586 8 8

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BANK OF NEW ZEALAND— continued Long-term Mortgage Department £ s. d. £ s * d* Long-term mortgage fund: Capital .. .. .. 703,125 0 0 Loans .. .. .. .. •• ® ® 8 6 Transfers to bank .. .. .. .. •• 114,496 11 9 £703,125 0 0- £703,125 0 0 Profit and Loss £ s. d. £ s. d. £ s. d. Dividend on C long-term mortgage shares 6,152 6 10 Balance at 31st March, 1945 .. .. .. 556,255 10 8 Dividend on D long-term mortgage shares 15,380 17 2 Dividend on preference B shares .. 25,000 0 0 Dividend on ordinary shares .. .. 150,000 0 0 196,533 4 0 Balance carried down .. .. • • 359, 722 6 8 £556,255 10 8 £556,255 10 8 Dividend paid December, 1945 £ s. d. £ s. d. Balance brought down .. .. 359,722 6 8 Dividend on preference A shares 43,750 0 0 i £s. d. Interim dividend on C long-term Profits for year ended 31st March, 1946, mortgage shares .. .. 6,152 6 10 including recoveries, and, after pay - Interim dividend on D long-term ment of and provision for all interest mortgage shares .. .. 15,380 17 2 due and accrued on deposits, provision Interim dividend on preference B for bad and doubtful debts, and for shares .. .. •• 18, 750 00 the annual donation to the Provident Interim dividend on ordinary shares 112,500 0 0 Fund are .. .. .. 2,099,046 7 0 196,533 4 0 LessBalance, being profit for the year .. 394,079 3 8 Salaries and allowTo which has to be added amount brought ances at Head forward from last year .. .. 359,722 6 8 Office and 209 branches and £ s. d. 753,801 10 4 agencies .. 665,230 16 2 Less dividend paid as above . . .. 196,533 4 0 Directors' re- _ 557,268 6 4 muneration,

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including London Board and local directors in Australia .. 7,413 9 9 General expenses, including rent, s t a t ionery, telegrams, postages, travelling, repairs To premises, depreciation, &c. .. 179,592 17 2 Audit Expenses Account .. 3,040 0 0 Rates and taxes 849, 690 0 3 1,704,967 3 4 394,079 3 8 £753,801 10 4 £753,801 10 4

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CERTIFICATES We hereby certify that, having carefully examined the foregoing balance-sheet and statements, we are satisfied that they have been correctly compiled from the books and accounts of the Bank, and that the balance-sheet is a full and fair balance-sheet, properly drawn up, and exhibits a true and correct view of the state of the Bank's affairs at the date thereof. Dated this 14th day of May, 1946. P. L. Porter, General Manager. D. Fairgray, Chief Accountant. I, David Firth Reid, the Chief Auditor of the Bank of New Zealand, do hereby certify— (1) That, having carefully examined the foregoing balance-sheet and statements, I am satisfied that they have been correctly compiled from the books and accounts of the Bank. (2) That I am also satisfied that the said balance-sheet is a full and fair balance-sheet, properly drawn up, and exhibits a true and correct view of the state of the Bank's affairs at the date thereof. (3) That I have verified so much of the cash, investments, securities, and assets of the Bank as at the date of the said balance-sheet were held at the Head Office in Wellington, and have had access to certified returns of so much thereof as were then held at the various branches and agencies of the Bank, or were then in transit. Dated this 17th day of May, 1946. D. F. Reid, Chief Auditor.

Approximate Cost of Paper.—Preparation, not given ; printing (706 copies), £22 10s.

BANK OF NEW ZEALAND— continued Reserve Fund £ s. d. £ s. d. Balance .. .. .. .. 3,575,000 0 0 Balance per last statement .. .. .. 3,575,000 0 0 £3,575,000 0 0 £3,575,000 0 0 Note.—London assets are shown in this balance-sheet in sterling, and no provision has been made for appreciation in their relation to New Zealand currency.

By Authority: E. V. Paul, Government Printer, Wellington.— 1946. Price 6d.]

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