Profits and dividends The operating profit of Lloyds Bank Limited

and its subsidiaries for the year ended 31 December1976 was €134,982,000 compared with €96,026,000 in1975. After adding the share of profits of associated companies, Group profit before tax was €147,734,000, 55 per cent higher than in1975 when there were losses in associated companies.

After the deduction for taxation, minority interest in subsidiaries and extraordinary items, the profit attributable to shareholders of Lloyds Bank Limited is €73,165,000(1975:09,638,000).

With the interim dividend of 3.715p per share paid in September, the recommended final dividend of 4.4220p per share will make a total distribution for the year equivalent, with the related tax credit, to 12.5185p per share gross (1975: 11.3804p), the maximum permitted.

Capital maintenance needs

At the end of 1969 Lloyds Bank Group's capital and reserves totalled approximately £266 million. At the end of1976, after a £76 million rights issue and a $75 million Eurobond issue, they totalled £721 million. In the same period, current, deposit and other accounts rose from £2,491 million to £10,746 million, while advances to customers increased from £1,364 million to £7,791 million.

The recovery in profitability, despite the recession in the United Kingdom, is encouraging. But we are still reporting our results under the historical cost accounting convention; this overstates profits during a time of inflation. Regrettably, there is still no recognition of the need, in inflationary conditions, for a bank to increase its capital to conduct even an unchanged real level of business if prudent balance sheet ratios are to be maintained. This need is similar to that of an industrial company for more capital simply to finance an unchanged physical level of stocks when prices rise.

For an international banking group the capital maintenance problems presented by domestic inflation are compounded by the weakness of sterling against many" of the other currencies in which its business is transacted.

Nationalisation must be fought

The proposal approved by the Labour Party conference in September to nationalise the four largest English clearing banks, one merchant bank and seven large insurance companies should be vigorously fought.

The clearing banks and the large insurance companies have always been major recipients of the small savings of the private individual. We have safeguarded these savings by prudent employment of them and our record of trustworthiness compares favourably With that of banks and insurance companies in any other country.

Now doctrinaire "socialists" of the left wing are seeking to persuade the ordinary citizen that these great savings institutions have failed in their duty to industry and therefore to the nation. Mrs Judith Hart has alleged that those who direct these institutions are not publicly accountable and that this is the real argument for nationalisation. It cannot be said too often that the first duty of a banker is to those who entrust their moneys to him. This responsibility dictates our lending policy to industry, to government and to the private borrower, because we are lending not our own but our customers funds. Neither does the record show that we have failed British industry. Creditworthy British Companies confirm that we have always met their reasonable needs.

There should be no illusions about the Proposal to nationalise us. The real intention is S o to extend control of the banks that abandonment of our present lending principles can be enforced, and our customers' savings directed into other' and perhaps less safe employment.

If, as I believe, our depositors and our shareholders want Lloyds Bank to continue to be accountable to them, and not to these doctrinaire theorists, they should take every 0Pportunity to say so loudly and repeatedly.

The economy—hope for the future

In the past year the British economy has experienced a major crisis of confidence. The Precipitous fall in the pound which began in March 1976 was in part the legacy of a rate of Inflation higher than that of our competitors. But it also reflected the doubts of foreign holders of sterling regarding Britain's ability to bring down her relative price level in the future. The government has belatedly taken some necessary measures to reduce its expenditure, • but this remains at a level which is disturbingly high in relation to its income. The deficit between government revenue and spending still constitutes a major factor contributing to domestic inflation. If foreigners' confidence in Britain and therefore in its currency is to be restored, inflation must be further reduced to a level nearer to that achieved by our principal trading competitors.

Business confidence has been drained by constant chopping and changing of policies in recent years, by the pressure of partisan legislation, and the growing governmental intervention from which both industry and commerce continue to suffer.

What is required is a condition of political and economic stability in which confidence can grow again.

Britain has advantages, if only we can make good use of them. North Sea oil offers us hope of a better future but it is not some cornucopia which will give each British family new riches in return for less effort. Oil revenue will give us a breathing space; we Must use it to restore our economic health by our own exertions.

Group staff

I take special pleasure on this, the last occasion when I can do so, in paying tribute to all our staff throughout the world.