26 JANUARY 1962, Page 32

Investment Notes

By CUSTOS (NINE of the reasons why the City does not kf like the tussles between la and COURTAULDS is that if Mr. Chambers wins, merges the two companies and sacks the Courtaulds board it will make it very much easier for the next Labour' Government to nationalise ICI on the grounds of monopoly. Politics apart, the fight is probably a bullish market factor. It calls at- tention once again to the fact that the market has been undervaluing a leading share (Cour- taulds), and curiously enough both Courtaulds and ICI now claim that they have turned the corner in their trading and can look forward to better results in 1962-63. If Courtaulds can give as rosy an estimate of future profits as ICI, then I think their board will hold out for still better terms. They have got Mr. Chambers up to offer- ing four ICI for five and they May -yet be able to get a share for share.

Bank Shares—British The 1961 profit statements of the joint stock banks have been very satisfactory, proving that the bad results of their hire-purchase finance interests are not important in size. This year the government pressure to restrain advances is not expected to relax and at the same time there is the probability of lower interest rates. This does not augur well for 1962 profits. However, the market opinion is that bank earnings are prob- ably twice as good as they are disclosed and as most dividends were comfortably covered by the 1961 profits as published, the shares are sound enough investments, even if unexciting at present prices and yields. UndiSclosed profits are added to inner reserves, which must now be enormous, having regard to the present values of their huge property assets. This implies that bonus issues will be declared from time to time. LLOYDS, for example, are giving one new share for six (last year it was one for five) and could maintain the same. rate of dividend on the in- creased capital. The current yield is only 2.9 per cent.—only slightly higher than the favourite BARCLAYS. The highest yield is afforded by MID- LAND at 3.3 per cent.

A German Bank Share Dealings began this week in the shares of the German COMMERZBANK on the basis of Ills. 6d. for the DM 10 deposit certificates to yield about 21 per cent. on the 16 per cent. dividend. The German banks, like the British, do not dis- close their real earnings, but, unlike the British, they engage in new issue and finance business and in mortgage banking and hold such large interests in industrial and commercial concerns that they may be regarded as industrial holding

companies as well as banks. The Commerzbank, for example, the smallest of the German 'big three,' holds 25 per cent, of the share capital of two leading multiple stores of Germany- Karstadt of Hamburg and Kaufhof of Cologne. The market price of these two holdings alone Would give a surplus of 267 per cent. on the bank's issued share capital. The present price of Commerzbank is 16 per cent, below the top and 13 per cent, above its low. The German stock exchange has suffered a sizeable reaction since the upvaluation of the mark and may yet go lower, but for the long pull Commerzbank should turn out to be a good growth investment.