BANK OF EGYPT.

Gisborne Times, Volume XXIX, Issue 3385, 28 November 1911, Page 8

BANK OF EGYPT.

CANNOT PROVIDE CASH TO MEET CURRENT OBLIGATIONS. j OFFICE BOY WHO ROSE TO BE THE MANAGER. On the closed doors o'f the Bank of Egypt, in New Broadi street, on September 30, was posted the following notice: Recent advices from Egypt have made it apparent to the board of directors that the bank cannot provide sufficient cash to meet its current obligations as they fall due l . The directors have, therefore, been forced to the conclusion that a suspension of the bank cannot be avoided, and that it is in the best interests of all concerned that the bank should cease payment as from to-day. The company will file a liquidation petition, and will take such steps as may be necessary with a view to the protection of the assets. The authorised capital of the bank is a million and a half, divided into sliares of £25 each. Of this capital £1,250,000 has been subscribed, and £025,000, equal to £l2 10s per share, paid up. Although most of the bank’s business Inis been done with the native community in Egypt, the directorate is entirely an English one, domiciled in England. The directors are Mr R. L. Barclay (chairman), Mr G. T. Biddulph, the Hon. S’. C. Glynn, Lord Grenfell, Lord Rathmore, and Colonel Sir C. Scott Moncrieff. The suspension cauised surprise in the City. Severe losses, however, were sustained ini the past owing to investments of a highly speculative character, and, in addition the concern had to meet severe competition on the part of German and other rivals. In the last report there was a reduction in the bonus paid, but at the same time profits appeared to be quite satisfactory. Tlie dividend for the year amounted to ten per cent., and a bonus of four per cent, was paid, which compared with a bonus of five l>er cent, in the corresjxmding period, while a balance of £44,700 was carried forward. This reduction in the bonus gave rise to anxiety, which was accentuated by the statement _in the rejiort that in order to provide for depreciation of securities and other contingencies a sum of £200,000 had been transferred from reserve, which left £400,000 to the credit of that fund. Certain changes, however, which were shown in the balance-sheet indicated better business, and, as conditions in Egypt were apparently improving, it was hoped that the business ol the hank would again progress. • CAUSE OF THE SUSPENSION. Tliere can he little question that the embarrassment winch came on the concern is in part due to the indifferent cotton crop in Egypt, which has brought about a large lockup of capital and has naturally tended to make many speculative advances which were made in the past of an uncertain character. It has been well known that for some years past the directors have placed a considerable amount to what Is known in hanking circles as “hidden reserve,” and accordingly considerable uncertainty exists regarding the actual depreciation which lias taken place in securities. Under the leadership of the most important Egyptian banks negotiations are m progress which will provide for the settlement of the existing liabilities and thus permit of the assets being realised to the best advantage. Although it may he necessary in the first instance to have recourse to the shareholders, it is expected that, subject to satisfactory realisation, the ultimate surplus will he at least sufficient to refund the whole of the paid-up capita? Ihe transfer of £200.000 from the reserve, mentioned above, was to provide against bad and doubtful debts incurred during the later years of the management of the bank 'by the late Luzzatto Pasha, who had joined the bank as office hoy, and risen to the position of general manager. He had. moreover, great influence among the native community in Egypt, and had built- up a big business for the hank, with the result that- its rate of dividend' increased during his management from nine to IS per cent TRIBUTE TO FORMER OFFICE BOY. it was, however, admitted hv the directors at the annual meeing in March tnat during the last few wears of his hie Luzzatto had led the hank into speculative business. He was the more easily able to do this owing to the commanding position he had attained in tlie hanking world. The chairman stated last March that had been left m the general manager’s hands, subject to everything of importland >eing snorted to them in EngLord Rathmore, one of the senior directors of the hank, who has subsequently retired from the board, said then that he could not forget the o-reat services which Luzzatto had rendered to the bank, however much he niioht condemn and deplore some of his actions and some of his methods of conducting the management of their bank chinng the last two or three years of ins life. It might have been that his great success financially and sociallv had turned Ins head; it might have been that he swept along j n a great of reckless gambling which was'"then running not in Cairo and Alexandria. Aftei the death of Luzzatto some three years ago the system of maiAeement was entirely altered, hut it was not until the beginning of this year that the directors announced that drastic financial measures had become neeessaiy owing to the speculations of former years. All the branches of the Bank of Egypt closed on Tuesday. There was some public excitement, but no scenes occurred. Tn anticipation of a satisfactory liquidation the Bourse was calm.