COMPANY MEETING

BARCLAYS BANK, LIMITED

RECORD DEPOSITS AND LIQUID POSITION SPENDING AND SAVING THE IMPORTANCE OF EXPORTS MR. EDWIN FISHER'S SPEECH

THE forty-fifth ordinary general meeting of Barclays Bank, Limited, was held on January 24th ar the head office of the bank, 54, Lom- bard Street, London, E.C.

Mr. Edwin Fisher (the chairman), in the course of his speech, said: You will wish to hear of the internal arrangements which we have seen fit to make as war-time measures. Looking back over the first 42 months of hostilities, we see how many changes which became necessary have taken shape and have been embodied in our day-to-day banking life. These changes have involved a great deal of work and unremitting attention at the hands of our manage- ment—work carried through efficiently and without undue dislo- cation at a time when many members of the staff were leaving their posts in the bank to join the services. We have already released over 2,000 men, and we must expect to see a further thinning of our ranks.

To fill the gaps, we have engaged the services of a number of temporary clerks, men and women, who are quickly becoming familiar with our work and methods, while some of our pensioners and former members of the women staff have returned to help us. But in spite of the readjustments which have had to be made and the many fresh regulations which have had to be considered and dealt with, we can, I think, say without exaggeration that the wide range of services which the Bank affords to its customers is being maintained. It is true that, in common with the other banks, we have closed certain small branch offices and the hours during which the banks are open to the public have had to be curtailed. Any inconvenience which these steps may have caused to customers is regretted, but we feel sure that shareholders and customers alike will appreciate the necessity for our action.

Air raid precautions have been not the least of our preoccupa- tions, for steps had to be taken to ensure the protection of the staff, and a duplication of records had to be made so that the vital ser- vices of banking could be carried on in all circumstances. These precautions necessitated some considerable expenditure on buildings and the removal of certain departments to less vulnerable areas, the departments selected being those that, by their nature, could readily be detached in this way. It cannot be denied, however, that the removal to a distance of departments which had been close at hand has a geographical disadvantage, making for some loss of contact. At the same time, I hope you will agree that, in the circumstances and bearing in mind the uncertainty prevailing when a decision on these matters had to be arrived at, no one would have wished to take another course. At the moment, it would be unwise in our opinion to cancel these temporary arrangements. Nevertheless, we shall be the first to welcome a state of affairs which will allow a reversal of the policy we have adopted.

THE UNION BANK OF MANCHESTER AMALGAMATION The report of the directors for the past year makes reference to the amalgamation of the business of The Union Bank of Man- chester, Limited, with that of our own bank. The shareholders will recall that it was just over 20 years ago, in November, 1919, that an offer was made to the shareholders of the Union Bank of Manchester to exchange their holdings for shares of Barclays Bank. Practically all the shareholders availed themselves of the offer and shortly afterwards we acauired the remaining shares and thus became the sole owner of the capital of the Union Bank of Man- chester. The step which we have now taken had been in contem- Plation for some considerable time. For 20 years the two banks have worked in the closest relationship, and, what is more, with a degree of harmony which augurs well for the new regime.

As the amalgamation took place on the ist instant, it has not affected our own balance-sheet figures which are made up to December 31st, 1939, and with which I now propose to deal.

THE BALANCE SHEET The total of our current, deposit and other accounts on Decem- ber 31st last amounted to £461,376,448, a record figure, and showed n increase of £28,295,263 compared with the end of 1938. In nsidering this rise, it has to be borne in mind that the borrowing large sums by the Government on Treasury bills and their penditure for the purposes of the war have resulted in an in- rease in the amount of credit circulating in the country and, consequently, in an expansion of the funds left with us by our customers on current and deposit account.

Our holding of cash in hand arm with the Bank of England had risen at the end of last year to £58,177,086, compared with £53,241,449 twelve months earlier. The nem of balances with other British banks and cheques in course of collection, at £19,161,492, showed an expansion of £4,288,372 during the year. This increase reflects the longer period which is now taken to clear cheques, owing to the removal—as a war measure—of a large part of the organisation of the London Bankers' Clearing House to a provincial centre. The total of our money at call and short notice on December 31st last stood at £28,713,245, an increase of £2,505,695 compared with the end of 1938.

The chief movement in the assets of the bank has been in bills discounted, which have risen from £54,594,153 to £67,585,175, of which £47,975,000 is represented by Treasury bills.

If these four exceptionally liquid assets, namely, cash in hand and with the Bank of England; balances with other British banks and cheques in course of collection ; money at call and short notice ; and bills discounted, be added together, it will be seen that they represent no less than 37.6 per cent, of our current, deposit and other accounts.

GOVERNMENT FINANCE

The outbreak of war and the necessity for financing greatly in- creased Government expenditure have resulted in a considerable expansion in the volume of Treasury bills available in the market. This was to be expected, but the comparison is all the more marked when we consider the much reduced supply of bills offered to the market for discount in the early months of the year. On December 31st, 1939, the total of Treasury bills outstanding which had been issued through the weekly tenders was £760 million, against £346 million on March 4th, 1939, and £488 mil- lion on December 31st, 1938. In addition to the bills placed by tender, others are issued direct to certain quarters, notably Govern- ment departments and Government funds, and the total of the Treasury bill issue on December 31st, 1939, amounted to £1,469.9 million, against £985.6 million on December 31st, 1938.

The normal method of financing an excess of Government expenditure over revenue is, in the first instance, to increase the Floating Debt, by the issue of additional Treasury bills, which are largely taken by the banks and the money market. The seasonal increase in the Floating Debt, which usually occurs in the first nine months of the Government's financial year, is in normal circumstances repaid in the last quarter out of revenue: but in conditions such as those resulting from the war, necessi- tating a more or less permanent increase in the National Debt, such a course will not be possible, and in due time the volume of Treasury bills will have to be reduced out of the proceeds of issues to the public of longer-term Government securities.

It would be unsound for Government war expenditure to con- tinue indefinitely to be financed by increasing the Floating Debt through the issue of Treasury bills. Ultimately, the money bor- rowed for the war must be obtained mainly from the savings of the people, if we are to avoid the evils of inflation. The demands of the Government for borrowed money are, however, likely to be so large that it will assist the raising of the necessary funds if some of the increased Government expenditure is first allowed to permeate the economic system and thus influence the volume of savings, prior to the actual issue of loans to the public. The financing of the war, therefore, will be facilitated by a resort to borrowing in the money market in the first place and subsequent appeals to the public for subscriptions to the issue of longer-term securities which must follow in due course.

MONEY MARKET RATES Money market rates have been considerably influenced by the course of international affairs. Political events last spring were responsible for a sharp but temporary upward movement in dis- count rates, while the development of the crisis in August was marked by the first change in the Bank Rate for over seven years, when, on August 24th, it was raised from 2 per cent. to 4 per cent. As a result of this increase, the average rate of discount for the Treasury bills allotted on the following day advanced to £3 148. 5.44d. per cent, per annum. These high rates did not prevail for any length of time, for, on September 28th, the Bank Rate was reduced to 3 per cent., and, on October 26th, it was lowered to its former level of 2 per cent. At present, the rate for three months' Treasury bills is around Li is. 9d. per cent. The increase in discount rates that followed the rise in Bank Rate naturally resulted, for a comparatively short period, in a much higher return on the money employed by the Bank in discounting bills, although, in computing the gain to the banker, the increased rates on deposit, which he had to allow during that period, have to be taken into account.

The total of our investments, excluding our holdings in sub- sidiary banks, amounted at the end of December last to £98,840,829, compared with £96,876,802 at the close of 1938. Of these invest- ments, £90,564,858 are in securities of, or guaranteed by, the British Government, and a very large proportion of them have definite maturity dates. As was only to be expected, the past year witnessed some wide movements in security prices. After the first shock resulting from the outbreak of war, a recovery quickly took place and, in the closing months of the year, a substantial advance (Continued on page 126)

BARCLAYS BANK, LIMITED

COMPANY MEETING ADVANCES

There has been a slight increase in our aavances to £200,847,108, against £199,452,980 twelve months ago. In considering this, it has to be borne in mind that, while certain trades and industries are actively engaged in fulfilling Government requirements, many others have been adversely influenced by war conditions. In fact, one of the first effects of the outbreak of war was to cause a rise in the total of unemployed, in spite of the many persons absorbed in the fighting services and in civil defence work. A reverse move- ment has happily now set in, and, as economic conditions become adjusted to the circumstances of the war, we may expect to see increasing activity which should be reflected in a steady reduction in the numbers of those out of work.

Applications for advances are always given the most careful con- sideration—that is clearly our duty—but, in times like the present, a special duty is imposed upon us to see that, consistent with prudent banking practice and having regard at all times to the legitimate interests of our customers, the credit resources of the country are primarily directed towards financing those activities which would most assist the National endeavour. (Continued from page 125) in prices occurred. It is notable that the Stock Exchange was closed for only six days during the crisis, whereas at the beginning of the last war it was closed for over five months.

POSITION OF FARMING

In my remarks to the shareholders a year ago, the position of farming was referred to at some length. The farming areas, in which we are widely represented and in which we have old and valued farming connexions, have increased in National importance. Steps have been taken by the Government to encourage farmers to grow more food; as you know, the measures include a grant of £2 per acre for ploughing up permanent pastures, with the object of increasing the output of crops, and a large part of the acreage selected has already been ploughed up. To the extent that we can expand the volume of home-produced foodstuffs, we shall rely less upon importations from abroad? add to our security and ease the pressure on our mercantile marine and on the exchanges.

In order to finance the cultivation of additional crops and the expansion of his output generally, the farmer will probably require some credit from the banks or elsewhere until he is able to market his produce. It may well be that the banks will be asked to afford short-term accommodation for this purpose. Given prices which will encourage him to extend and develop his operations with con- fidence and, more important still, conditions which will enable him to plan ahead, the farmer can surely rely on assistance from his banker if it should be required. It is impossible to generalise, for farming is an individual as well as a diversified calling and each case falls to be considered on its merits, but the good farmer need not feel apprehensive that he will fail to meet with a full understanding of his problems at the hands of his banker.

NET PROFIT

The net profit for the year ended December 31st last, after pay- ment of all charges and after making- provision for all bad and doubtful debts and for contingencies, amounted to the sum of £I,784,88o 4s. 5d. To this sum has to be added £527,719 19s. ltd. brought forward from the previous year, making a total to be dealt with of £2,312,600 4s. 4d. The directors have appropriated £200,000 to contingency account and £15o,000 to reduction of pr,!- mises account, and interim dividends at the rate of 5 per cent. on the " A " shares and 7 per cent. on the " B " and " C" shares, less income-tax at 5s. 6d. in the £ in each case, were paid on August rst last, costing £755,064 7s. The directors recommend final dividends of 5 per cent., making to per cent. for the year, on the "A" shares and 7 per cent., making 14 per cent. for the year, on the " B " and" C " shares, less income-tax at 7s. in the £ in each case, involving a sum of £676,954 5s., and leaving a balance of £530,581 12s. 4d. to be carried forward. Some reduction of profit was not unexpected, particularly bearing in mind the higher rate of income-tax imposed in the War Budget and the special expenditure which we had to face in many directions as a result of the war and to which reference has already been made. I hope that shareholders will agree with us that, in all the cir- cumstances, the results shown are satisfactory.

SPENDING AND SAVING In the first days of the war much advice was sought and given on the vexed question of spending and saving. The advice given was often conflicting and the individual was left somewhat in doubt as to which course to pursue. In those early days many influences were causing loss of employment to workers and it was natural and right to stress the need to avoid an exaggerated curtailment of private expenditure so that trade should not be unduly depressed. As each day passes, this need is becoming less important, for as our war effort grows, as more and more of our labour force is absorbed in the fighting services and as more and more of our

industrial organisation is diverted to the production of munitions, the call to spend gives way to the =11 to save. By limiting our own consumption, we shall not only reduce unnecessary imports,

but shall also set free supplies that can be exported. .

We all know that increasing war requirements will leave less of current production available for the needs of the civil population. If, however, the contraction in the supply of goods is not accom- panied by a reduction in the demands of individuals, we are bound to suffer the evils of rising costs and prices. It is Utopian to hope that in war time there will be no rise in prices, that wages will remain stable and that profits will also keep in step. The know- ledge that such changes have already occurred lends added emphasis to the need to prevent, as far as possible, dislocation of the econo- mic structure and what has been described as the vicious spiral in which now prices, now wages seek for the ascendancy. Ration. ing alone would not provide the solution, for although valuable as a means of securing equitable distribution of limited supplies, it would tend to divert demand to unrationed articles.

To some extent, the adjustment will be accomplished by the higher taxation which the country is now bearing and which will result in the transfer to the State of an increased share of the purchasing power of the individual citizen, but taxation, even at its existing high level, will not furnish a complete solution. The individual is therefore being urged to save, and to the extent that he saves Government expenditure will be facilitated and the competi- tive bidding up of prices will be avoided. In return for his effort and the sacrifice which he is called upon to make, the indi- vidual is entitled to expect that the Government is getting good value for money wisely spent.

THE IMPORTANCE OF EXPORTS

Not the least of the problems facing the Government in financing the war is the provision of foreign exchange with which to pur- chase supplies from abroad and the solution of this problem will play a part, the importance of which cannot be exaggerated.

The external resources of the United Kingdom are large and steps have been taken to mobilise them. We shall, however, be well advised to guard jealously iliese overseas assets, for they cannot easily be replaced. Moreover, amongst these resources are considerable investments in other countries which provide us with a large income that helps to maintain our standard of living, for these receipts have the same effect upon our ability to buy abroad as an export of goods. Custom decrees that we should describe them as " invisible " exports, but be that as it may, their value to this country is both real and substantial. Every endeavour, therefore, should be made to pay for our necessary imports by the results of current effort.

A VITAL FACTOR The searchlight of attention has rightly been focused with more than usual intensity on the importance of our export trade and we are in no doubt as to the vital part which this arm plays when Britain is at war—a part which ranks among the foremost when we come to appraise and pass under review the strength of our National armoury. It is one thing to define an objective and another to devise the means to attain it. Control of both imports and exports is essential in war time, in order that we may be able to use our external purchasing power to the best advantage and to ensure that the needs of the fighting forces are fully met. Although under a system of control a certain amount of freedom must be surrendered by the trading community; control at its best should be so ordered as to cause a minimum of inconvenience and disturbance—control operated by persons who have understanding and who will not stifle trade by the imposition of dispensable formalities.

Trade should be allowed to expand and develop, so far as may be, in a normal, healthy and unrestricted fashion, subject only to that degree of control which the emergency of the times properly imposes. We should endeavour to deny to ourselves the imporn- fion of any goods that can rightly be described as non-essential, in favour of those many requirements which are vital to our needs and which come to us from overseas. Such a course would not only free the foreign exchange needed to finance the latter, but would also liberate valuable cargo space in which the essential goods would be carried to our shores. While it is true that certain material which we need in war time must be obtained from overseas, it may even be prudent that other purchases should be made abroad, although the goods could be produced at home, for by this means a saving of our own man power is accomplished. The goods so purchased could be paid for by sales of goods manufactured a this country and not required for war purposes. To secure by our export trade a return flow of the goods we need or the exchange to buy them from other countries is a cardinal factor that is at important as it is self-evident.

Economic strength will play such an impressive part in war that no opportunities must be lost in the solution of the problem of how to sell more and more goods abroad. The Government, the individual citizen and the manufacturer all have their separate.taslo to perform. The question of supplies will be the responsibiliel of the Government, who will decide the priorities to be observed, and the individual will assist by limiting his consumption. The manufacturer, despite control and despite the difficulties of selling abroad under war conditions, retaining his initiative, will seek to gain a sure foothold in every available market. Essential as that is to-day, it will be of transcendent value in the days that le ahead, when, the war over, we are called upon to face and deal With the many problems that must assuredly arise.

The report and accounts were unanimously adopted.