COMPANY MEETINGS

MERCANTILE BANK OF INDIA

SATISFACTORY RESULTS DESPITE DIFFICULTIES SIR CHARLES INNES ON THE OUTLOOK

THE forty-fifth Annual General Meeting of the Mercantile Bank of India was held on March 29th, at Winchester House, London, E.C.

Sir Charles A. Innes, K.C.S.I.; C.I.E., the Chairman, in the course of his speech, after expressing regret at the retirement of Lord Catto, from the chair, said : " You will notice in the balance- sheet that our deposits are up by £1,350,000 compared with last year, and that on the other side there has been an increase of about one million sterling in loans and advances. Our allocations to the pension fund, the premises account and contingencies are the same as last year. The net profit is about the same as last year in spite of our having had to provide for National Defence Contribution for nine months. You have heard so much of the recovery of trade that sonic of you may have expected a larger figure of profit, but the Bank is an exchange Bank mainly engaged in the financing of Eastern trade, and it is well known that the recovery of foreign trade has lagged behind that of home trade. Moreover, we had special difficulties in 1937.

The year indeed began well. In the first three months trade was active in most of the countries in which we operate, and indeed by March trade conditions in some of them had almost begun to approach the dimensions of a boom. But the second half of the year did not fulfil the promise of the first. The first setback was associated with what is usually known as the " gold scare " in the spring. Then in August followed the invasion of China by Japan. You can readily imagine how this war disorganised the trade of China, and its reper- cussions were felt in almost every country in which we are established, particularly India and Malaya. Finally, there came in the autumn the quite unexpected recession of trade in the United States of America. The effects of this recession were world-wide, but America so dominates the market in such commodities as rubber and tin that nowhere were they felt with greater severity than in countries like Malaya. I think I have said enough to show that having regard to all the circumstances of the year we may legitimately regard our net profit with satisfaction.

POSITION IN INDIA.

The two outstanding events of the year in India were the inaugura- tion of provincial autonomy and the separation of Burma. Both measures imposed extra liabilities on Central revenues, the separation of Burma costing 251 lakhs and the inauguration of provincial autonomy 198 lakhs. The military operations in Waziristan also caused heavy additional expenditure, and it is a testimony to Sir James Grigg's careful husbanding of Central revenues that after pro- viding for these- extra burdens he was not only able to make an immediate contribution of 138 lakhs for the financing of provincial autonomy, but was also able to balance his budget for next year without any increase of taxation. He is to be congratulated on his achievement. It was made possible by the improvement of railway revenues and of Customs and Central excise receipts, though I regret to notice that all these sources of income deteriorated in the later months of the year. The improvement in imports is especially gratifying as indicating increased purchasing power.

The tea industry has had a prosperous year, thanks to a skilfully managed Restriction Scheme, and though its labour problem still remains acute, the coal industry, after a long period of depression, is getting more remunerative prices. The cotton mills have also done well. The feature of the year for them was a large increase in exports both of yarn and cloth, due partly to the preoccupation of Japan with the war with China and partly to the stoppage of the Chinese mills. I have no good account to give of the great jute industry. For reasons into which I have not time to go, the mills entered some time ago upon a period of unrestricted competition. It is true that they succeeded in getting a record off-take for their products, exports of manufactured goods having risen to 1,031,000 tons in 1937 against 912,00o tons in 1936 and 669,000 tons in 1934. But they received very low prices for their goods. Indeed, prices are now at an uneconomic level, and moreover stocks, especially of hessians, are piling up. Negotiations are now proceeding for a curtailment of working hours by agreement, and everyone who has the interests of the industry at heart sincerely hopes that they will be brought to a successful conclusion, or that some other agreed solution of the present difficulties will be found.

THE SINO-JAPANESE WAR.

After referring to the position in Burma, Siam, Ceylon and Malaya, he said : I am afraid that I cannot paint a very cheerful picture of Shanghai. It is true that the value of the trade of the port in 1937 at 913 million Chinese dollars was only a million dollars less than in 1936, while the trade of China as a whole was actually greater in 1937 than in 1936. It increased from 1,647 million Chinese dollars to 1,792 millions. These are astonishing figures. They are due, of course, to the fact that there was a remarkable expansion of trade in the first seven months of the year. By the end of July imports had increased by nearly 37 per cent. and exports by 45 per .cent. The year indeed opened under the most favourable conditions. Trade was booming, crops were promising, revenue was increasing

and China's currency and finance had been placed on a much better footing. The Government was firmly established in Nanking, and with its authority extending to all but the most remote parts of the country, there was a degree of unity hitherto unknown. The Shanghai Stock Market, which had been through a long period of depression, was moving steadily upwards, and on every side there were unmistakable signs of industrial recovery and trade expansion.

Then came the tragedy of the Japanese invasion of China. The first rumble of war occurred in the North, but hopes of a peaceful settlement were not dispelled till fighting broke out round Shanghai on August 13th. Fighting continued in parts of the Settlement and round Shanghai until November path, when finally the Chinese were driven from all surrounding areas. This was a period of great anxiety, our chief anxiety being for the safety of our staff and their families in Shanghai. Fortunately all of them came through un- scathed, but business, of course, was carried on only under the greatest difficulties. The trade of Shanghai dropped from 394 million Chinese dollars in the last five months of 1936 to 170 million dollars in the corresponding months of 1937. It is even less now, for with Shanghai surrounded by Japanese forces, no communication is possible with the hinterland and export trade is virtually at a standstill.

I can say nothing of the future except that with a return to normal conditions/ we are well equipped to resume our increasing share of financing the trade of Shanghai, and that past experience shows what astonishing powers of recuperation Shanghai has ; but trade cannot recover until the war ends, and, unfortunately, there are no signs of an early termination of the struggle.

The effect of the China-Japanese war was to increase the trade of Hongkong. The gross value of the foreign trade in merchandise increased from 8803 millions in 1936 to $1,084 millions in 1937. The increase was partially due to the fact that much cargo intended for Shanghai was landed at Hongkong, taken delivery of there and re-exported. Many rich refugees poured into Hongkong from China, local industries were benefited, and retail trade improved ; but there are no less than 23 recognised banks in Hongkong, and competition between them is very keen.

We have had a reasonably good year which would have been better had it not been for untoward events, and the prospects for the coming year are not quite so encouraging as they were a year ago, particularly in view of the recent grave deterioration.of the political situation in Europe ; but there is no need for pessimism. We have learned to take the rough with the smooth, and I think I can say with some confidence that, thanks to the support which you have consistently afforded the board, your Bank is in a strong position.

The report and accounts were unanimously adopted.