COMPANY MkETING
NATIONAL PROVINCIAL BANK, LIMITED
STATEMENT BY THE CHAIRMAN, COLIN FREDERICK CAMPBELL, ESQ.
IN vises of the continuance of conditions which prompted me to circu- late my observations, with the report and balance sheet last year, I am taking a similar course this year.
THE STATEMENT OF ACCOUNTS The enclosed statement of accounts reveals a general expansion of figures, but alterations in individual items over the year have been mainly a continuation of trends with which I dealt a year ago.
On the liabilities side of the balance sheet, deposits show a- con- siderable increase of £85,000,000.
The counterbalancing increase on the assets side is spread between cash, treasury deposit receipts and investments, which show increases respectively of £9,000,000, £79,000,000 and £23,000,000.
In ordinary peaceful circumstances expansion of bank figures may generally be regarded as a reflection of increasing industrial and trading prosperity. The case is very different in time of war, which must always be an impoverishing process. There is a tendency to forget this elementary fact and to interpret swollen figures as an indication of greater national prosperity. As far as banking is con- cerned, I can assure you this is not the case. It is true, of course, that our gross revenue from treasury deposit receipts and investments has shown a sharp rise, but this has been partly offset by reduced income from bills discounted and particularly from our main source of revenue, viz., advances. Loss of income under these heads, together with the rising expense of supplies and overheads and the cost of the additional deposits, have, to a great extent, counterbalanced the increased income Lin our holdings of Government securities.
PROFIT AND Loss ACCOUNT: DIVIDEND
When all factors are taken into consideration, I think we may regard the results of the year's work, which shows a net profit of £1,057,783, as satisfactory.
After payment of dividend at the rate of 15 per cent. per annum, and after allocations of £100,000 to bank premises account, £150,000 to pension fund, and a special £100,000 to war contingencies fund in view of the many uncertain factors with which we may be faced in consequence of the war, the amount carried forward is £543,113.
It will be observed that in the report the dividend declared is stated net, i.e., less income tax ; this represents the actual cash pay- ments to shareholders. In former years dividends have been stated gross, i.e., subject to income tax. The effect of this change is that the income tax recoverable by deduction from the dividends has now been charged befOre arriving at the profit shown by the account.
Although the rate of dividend declared is expressed as at the rate of 15 per cent. per annum on the paid-up capital of the bank, it should be realised that the shareholders' interest in the bank is a much larger sum than this item. Were the dividend expressed in relation to the paid-up capital the reserve and internal funds accumu- lated in past years, the rate would be a very moderate one.
THE OUTLOOK I have referred above to the pronounced trend towards expansion of banking funds. Experience of the last war taught us that large- scale continuous Government financing by borrowing from the banking system engenders continuous growth of deposits. The main justification of this type of financing is based upon the necessity of bridging the gap between national expenditure and other types of revenue, but there are obvious dangers attached to it. No great harm need neces- sarily result from an increase in purchasing power provided the excess is not spent in consumption of the limited supply of commodities. There is, however, good reason to think that more than is desirable in the national interest is still being spent in this way. There is urgent need for every individual to curtail still further his or her consumption of goods and to lend savings direct to the Government, and in this connexion I trust that what I have already said as to the increased money incomes of large numbers of the community may reach some, at least, of thoie for whom it is intended.
The momentous political and military events of the past year are fresh in the minds of all of us. The Allied nations have achieved a number of successes to set against reverses sustained particularly in the Far East. The outlook a year ago was indeed obscure, and we are thankful that a great deal of uncertainty has since been dissipated. We now know exactly where we stand vis-a-vis the leading nations of the world, and we have the further knowledge that the combined resources of our Allies and ourselves should become over- whelming as the war progresses.
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