FINANCIAL NOTES.
Among' the many capital flotations expected in the not distant future must be included the large Greek Loan ; and although I believe it will be of an inter- national character, the City is expecting that London will once, again be called upon to take the lion's share in the matter of aiding a European country. In this particular case not only is the cause of the borrowing good, but I fancy that the security will be shown to be better than has been imagined by those who have not given a close heed to financial and economic conditions in Greece. One of the difficulties in rendering aid to most of the Central European States is the difficulty in ensuring adequate internal reforms and financial effort generally, in the direction of Budget equilibriums, &e., though in that particular respect Greece has probably shown a greater recognition of what is required to maintain her credit than has been the case in many of the other countries.
The speech of Mr. Andrew Williamson at the recent meeting of the English, Scottish and Australian Bank, of which he is the Chairman, was interesting both as regards his statements concerning the bank's position and progress, and also as regards the present economic conditions in Australia. There is an increase to note in the general turnover of -the bank's business, and also in the present total of deposits, while as regards net earnings, the figure was £502,000 as against £470,000. Allocations to special funds are also good, for in addition to the usual £15,000 added each year to the Reserve, it is now proposed that a further amount of £185,000 should be placed to that fund making a total allocation of £200,000. After these allocations have been made the same dividend as a year ago of 12i per cent. on the Ordinary, shares is maintained, while there is a material increase in the balance forward.
* * * * In addition, however, to the dividend shareholders get what amounts to a substantial bonus in the shape of a fresh capital issue. The amount to be offered is 150,000 shares of £5 each, to be paid up as to £3 per share at the price of £5 per share, representing a premium of £2 per share, and they will be offered to shareholders in the proportion of one new share to each four previously held. It is intended to apply the premium of £2 to paying up 10s. of the present uncalled liability of £2 10s. per share on the existing shares, thus bringing all the shares to a paid-up amount of £3, with £2 uncalled. In the first place, therefore, it will be seen that shareholders get a bonus of about £2 per share on the present market price, while the paying up of 10s. on existing share capital constitutes a further bonus of about 10s. to say nothing of increment in capital value of the old sha:res. Moreover, in the matter of uncalled capital, there will be the same amount as security for the depositor as exists to-day, while in addition the paid-up capital will have been increased to the extent of £750,000. The scheme is an ingenious and a sound one.
So much interest has been taken in the problem of the premium which has had to be paid on all exchange remit- tances to Australia that particular interest attaches to the remarks of the Chairman of the English, Scottish and Australian Bank concerning the exchange and currency problem. That there should have been some currency stringency is certainly not surprising in view of the figures given by Mr. Williamson with regard to the value of wool exports. These exports, for example, in 1921 were valued at about £33,000,000, whereas for the year ending June 80th last the total was over £56,000,000, while, it is reckoned that for the current year the value may even exceed £75,000,000. Before the establishment of the Commonwealth Bank, the trading banks, Mr. Williamson pointed out, had the right of issuing notes, as indeed the banks in New Zealand still have. Under those conditions it was possible for the private banks to expand their note issues in connexion with seasonal requirements. Some few years ago, however, when the Commonwealth Bank was formed, the right of note issue was taken away from the private banks, and there certainly seems to have been an insufficient flexibility in the arrangements by the note-issuing authorities in the new conditions which have arisen since the War. How- ever, as we know, the Commonwealth Bank has now been reconstituted and a decision has recently been made to increase the note issue by £15,000,000 for a defined limited period carrying interest at Bank of England rate. The arrangement has been made to deal with the heavy seasonal requirements, and it should undoubtedly ease the situation, though as Mr. Williamson pointed out, the relief " can only be regarded as a temporary expedient ; the trade balance can only be effectively adjusted by the movement of goods or of gold." It is also interesting and satisfactory to note that the Chairman of the English, Scottish and Australian Bank takes a hopeful view of the probable effects of the reconstitution of the Commonwealth Bank in enabling it to exercise the functions of a central reserve bank. " Great hopes," says Mr. Williamson, " are entertained that this will prove highly beneficial to the banking and general financial business of Australia, as has been the case in other countries where a Central Reserve Bank has been established."
A. W. K.
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