DISCOUNT COMPANIES' PROFITS.
If the results announced by the joint stock banks may be regarded as entirely satisfactory I think that the managers of the leading Discount Houses must be congratulated still more upon the steady maintenance of their dividends. For it is an open secret to those in touch with the Money Market that by reason of the prolonged cheapness of money and the scarcity of Bills the normal profit-earning power of the Discount Houses has been materially affected. One of the many unfortunate legacies of the War has been a material decline in the volume of trade bills, the discounting of which has always represented the main sphere of the activities of the London Discount Houses, whose profits in the main consist of the margin of difference between the rate at which they are able to procure money and the rate at which the bills are discounted. During recent years, however, notwithstanding the glut of money, the fall in discount rates has been greater than the fall in the rates at which Discount Houses obtained their money from the banks, and the margin of profit at times has been of the most meagre description. Fortunately there are not wanting indications of some slight hardening of discount rates, and I say " fortunately," because the movement is not one which will in the faintest degree affect adversely trade interests, while on the other hand it should make for healthier conditions in the Money Market, and benefit the Discount Houses, whose functions have been and, I believe, always will be of paramount importance to the supremacy of the London Money Market. Meanwhile, by a sound conservative policy and great skill and judgement in the matter of the selection of short-term securities, the Discount Houses have held their own well during yet another most difficult year.
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