THE BANK OF NEW ZEALAND.
THE TRUTH MADE KNOWN. REPORT OF SHAREHOLDERS’ SPECIAL COMMITTEE. HONESTLY FACING THE POSITION. ABSORPTION OF RESERVE FUND AND ONE-THIRD OF PAID UP CAPITAL. Auckland, last night. At the Bank of New Zealand’s special meeting at 2 o’clock to-day, the Shareholders’ Committee’s special report was read by Mr Justice Gillies. The report said: “ Our appointment implied wide-spread anxiety on the part of shareholders to have independent assurances of the Bank's real position. Thanks to the provision of the Inspector, and the efficiency of the Bank staff, our work was facilitated, and we were soon enabled to assure ourselves of the soundness of ths Bank in respect of its ability to meet its liabilities, —* conviction which on further examination wa» confirmed. But we, at the aame time, found the position eminently unsatisfactory to shareholders, and that circumstances required an enlarged interpretation of our commission, and mature consideration. Hence the delay in the presentation of the report. Our examination disclosed that many securities had been taken to support weak accounts, the value of which had fallen greatly, many accounts being in liquidation, or which ought to be, the cover for which had become obviously inadequate altogether, and involving losses which the Directors had not faced, and which on rigorous examination will absorb the reserve fund and one third of the Bank’s paid-up capital. The data supplied to us are of a clear and exhaustive character, amply authenticated, and after minute and careful examination of the variom accounts and assets we are satisfied that under good management and judicious realisation of securities the amouot named should cover all losses. It is obvious to us that for years the Bank has been paying a rate of dividend it ought not to have paid. Securities have been held and accounts kept going in the vain hope of recovery of the values placed upon them, in what was in fact a period of inflation, and supervening upon this heavy losses in Australia brought matters to a climax, which we have now to face. We will next explain measures which, upon conference with the directors, we think should be adopted to rehabilitate the Bank, The necessity for radical changes in the administration, and for an increase in the bank’s capital, became immediately apparent to us, and we may here observe that through deaths and retirements the directorate and general management have already been reconstituted.
So much capital being lost, it must ba writtten off, and shares reduced from £lO to £7, leaving £700,000 of paid up capital, and £l,OOi),OCO of reserved liability It is proposed to take authority to create 100,000 new shares, and to issue 50,000, thereby bringing the paid up capital of the Bank to £1,100,000 and the reserved liability to £1,500,000. We are pleased to be able to announce that applications have already been secured in London for twenty thousand shares, by firms and persons of the very highest standing, which not only ensures success of issue, but gains for the Bank new connections Which the directors value highly, and will do their utmost to strengthen. Applications could hava been secured for a large number, or indeed probably for the whole issue, but we deem it better to reserve one-hall tor the
.colonies. We will only add that notwithstanding the character of our report we see no occasion for despondency as to the future of the Bank, or doubt that the shares you bold, or thase you take up, will be good investment, and it should be borne in mind that such investigation in a time of depression so extreme is one that would be trying to any institution. The trenchant character of our report may be taken as evidence that we were determined to face and disclose all the facts. The goodwill of the Bank's business is of great value. It has in the past divided am ng shareholders over and above 10 per cent dive., sums which aggregate to nearly double the amount of capital now lost, and while desiring to guard against the oreatiou of unduly inflated expectations we can say from the figures of the half year just oloeed that the Bank's legitimate business is capable of yielding good dividends notwithstanding the serious drawbacks under which It has
of late be n working. Given time to enable the Directors to get rid of unproductive assets and to develop the Bank's legitimate operations still better results can be expected. On its merits the investment is one which m fty be expected to yield satisfactory returns, and command a considerable premium. The Bank’s bus.’nsss is hy no means confined to New Zealand. In London it has large and valuable deposits, in connection with the exchange business, from which virtually no losses are ever made. In Amtrelia there is
business of a strictly legitimate character, represent d by assets and liabilities aggregating over three millions sterling, contributing a material proportion of valuable profits, and as regards New Zealand there is no inherent reason why i should not be as prosperous and wealthy as any colony of the group, or inferior to none of them in climate, fertility, and natural resources. On its borrowing proclivities, which have been the subject ot so much adverse comment, it is not singular. So far as these have been excessive, that is but the passing incident of its national history, the temporary oonseq lenoes of which have been too sharply brovgbt home to the people ot ths colony to permit of the lesson being soon forgotten, The meeting passed off almost without discussion, the resolution suggested by the Committee's report for writing off losses and incurring the capital being adonteAnem con.
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Gisborne Standard and Cook County Gazette, Volume II, Issue 204, 4 October 1888, Page 2
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947THE BANK OF NEW ZEALAND. Gisborne Standard and Cook County Gazette, Volume II, Issue 204, 4 October 1888, Page 2
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