The Banking Yeat7— . -Rise in Investments ALTHOUGH the reports and balance-sheets

of the English banking institutions for the year 1934 indicate very plainly the many difficulties with which bankers have been confronted in conducting their business, they never- theless reflect to some extent the moderate improve- ment which has taken place in the trade of the country. The salient figures of the balance-sheets are set out in subsequent tables and they merit careful examination because we are living in abnormal times, and it is not always easy to trace the connexion between the individual movements in the balance-sheets and the causes responsi- ble for them. It is a little surprising, for example, to find that, although as compared with two years ago there has been a great rise in the holding of Investments, set off by only a small- decline in Loans and Advances, Deposits at the end of 1934 were only a trifle higher than at the end of 1932. Here, for example, is a table showing the movements in Deposits over the past three years, and also the movements in Loans and Advances over the same period.

DEPOSITS. Dec. 31st,

1932. _ Dec. 31st, 1933: £ Dec. 31st, 1934. E Barclays Bank 381,846,610 378,759,772 380,093,759 Lloyds Bank .. 382,142,705 364,553,939 372,140,172 Midland Bank .. 419,282,966 413,752,673 419,037,922 National Provincial Bk. 291,822,828 . 288,397,117 297,129,880 Westminster Bank 298,182,934 294;739,761 - 305,653,206 Total .. 1,773,278,043. 1,740,203,262 1,774,054,939 District Bank .. 56,829,351 53,957;893 52,888,705 County Bank .. .. 18,231,732 17,570,793 18,028,262 Martins Bank .. 85,814,430 81,578,545 82,620,032 National. Bank .. .. 39,131,746 38,537,291 37,575,720 Union Bank of Man- chester .. 19,159,664 17,393,187 17,452,952 Williams Deacon's Bank 33,812,263 33,498,284 33,742,676 Total .. 252,979,186 242,535,993 142,308,347

LOANS AND ADVANCES.

Dec. 31st, Dec. 31st, 1932. 1933.

£ Dec. 31st, 1934.

£ Barclays Bank .. 153,158,668 148,835,468 155,979,234

Lloyds Bank 141,196,001 132,966;351 136,301,680

Midland Bank .. 170,230,809 164,298,658 163,589,51; National Provincial Bk. 122,231,862 111,817,395 113,398,473 Westminster Bank= . 105,747,152 102,757,306 110,623,366 Total „ 692,564,492. 660,675,778 6/9,892,265 - District Bank -.. 17,690,457 17,107,970 16,463,613 County Bank .. 8,931,365 8,564,934 7,679,758

Martins- Bank . .

29,464,644 28,319,444 30,349,576 National Bank ..

Union Bank of Man- 14,520,190 - • , 14,729,747 14,747,625 ' cheater 7,491,713 6,902,926 7,199,519 Williams Deadon's Bank 11,395,388 10,898,448 11,419,688 Total 89,493,757 86,523,469 87,859,779

LOANS AND ADVANCES UP.

From the foregoing it will be seen that as compared with 1933 Deposits for the past year rose by about £34,000,000 so far as the " Big Five " were concerned, though in the second group, which, with the exception of Martins and Williams Deacon's, is concerned more with provincial banking, the total of deposits is almost identical with that of a year ago, but is more than £10,000;000 less than at the end of 1932. With the Big Five also, while there has been an increase for the year of about £34,000,000, the increase compared with the end of December, 1932, is only about £1,000,000. With regard to the loans and advances, the decline,which has been continuous over a period of yerars, seems at last to have received a cheek; the total of loans and advances in the ease of the Big Five show an increase of nearly £20,000,000 compared with 1933, while in the second group there is also an increase of over £1,000,000. Of course,' compared with, say, 1931, the total of advances still • shows a stupendous decline, but nevertheless the moderate expansion during last year is a distinctly encour- aging feature. Moreover, it seems probable that the rise is greater than appears on the surface. That is to say, the amount of new loans may be greater than is suggested by this increase of about £20,000,000. Trade has been better during the last eighteen months, and there is good reason to believe that during the past year quite a number of outstanding debts have been repaid, otherwise the rise in loans and advances would have reached a much larger total.

FALL IN BILLS DISCOUNTED.

When, however, we turn to the bills discounted, we are at once confronted with the difficulty which is being experienced by the banks in finding an adequate outlet for their resources. Short loans to the Money Market and bill holdings have always been the first line of defence for the banks after the actual holding of cash itself. The market now, however, is suffering from extreme scarcity of bills. This is partly due to the repayment of large amounts in Treasury Bills, and for the past year the total of Bills Discounted by the Big Five shows a decline of about £37,000,000, or if comparison were made with 1932 the decline would be about £123,000,000. On the other hand, some of the country banks, including the District-Bank and the County Bank, show a small increase for the past year. To some extent this fall in Bills Discounted by the • banks has been offset by an increase in Money at Call and ; Short Notice; the total at the end of 1934, so far as the Big Five are concerned, was £138,364,000 as compared with £106,752,000 at the end of 1933. It seems probable that this increase may be due, in part at all events, to the readiness of individuals and institutions to " carry " stocks on borrowed money. Following are the details of Bills discounted as applicable to the various institutions :

BILLS DISCOUNTED.

Dec. 3Ist, Dec. 31st, Dec. 31st, 1932. 1933. 1934.

£ E 66,289,257 59,953,329 47,572,778 76,788,343 56,887,317 47,214,847 86,505,644 62,828,431 64,520,419 58,928,441 48.167,255 39,571,698 66,885,805 42,089,362 33,652,343 355,377,490 269,925,714 232,532,085 7,188,260 4,886,484 6,838,462 250,192 338,284 401,274 1,133,889 895,479 1,304,207 1,849,197 1,781,466 1,698,494 1,383,416 305,395 271,480 3,690,730 2,482,928 2,468,084 15,495,684 10,690,036 12,982,003 Barclays Bank .. Lloyds Bank .. Midland Bank .. National Provincial Westminster Bank Total ..

District Bank ..

County Bank ..

Martins Bank ..

Natiolial Bank ..

Union Bank of Man- chester Williams Deacon's Bank Total RISE IN INVESTMENTS.

As already stated, the Deposits of the Big Five show for the past year an increase of about g34,000,000 and the fact that the expansion was not greater is probably con- nected with the falling off in Discounts already referred to, for, on the principle of loans creating fresh deposits, there should have been an increase in deposits due to that circumstance alone ; the aggregate holding of invest- ments by the Big Five showed an increase of about £33,000,000, a movement which might also be expected to be reflected in a rise in deposits, inasmuch as the banks' payments for investments naturally reached sellers who are themselves depositors in the banks. Moreover, as will be seen from the following table of investment holdings by the various banks, the present holding of investments by the Big Five shows- an increase of about £107,000,000 compared with 1932; though over that same period there has only been an increase of about £1,000,000 in deposits : INVESTMENTS. ' :1 '

Dec. 31st, Dec. 31st, 1932. 1933.

£ £

Barclays Bank .. 87,351,718 98,145,737 Lloyds Bank 85,359,183 99,390,702 Midland BanIc 93,065,351 118,086,369 National Provincial Bk. 60,749,090 74,831,330 Westminster Bank 72,250,653 91,490,575 Total .. • . 398,775,995 471,944,713 District Bank .. 21,805,476 23,565,395 County Bank .. 5,858,997 6,592,002 Martins Bank .. 30,429,571 32,050,557 National Bank .. 17,026,787 17,661,696 1.7nion Bank of Man- chester 3,271,496 3,804,702 Williams Deacon's Bank 9,753,892 10,124,277 Total .. 88,146,219 93,798,629

NOTE.—These figures do not include investments in affiliated banks.

From the foregoing it will be seen. that in. the case of some of the country and semi-country institutions there was a moderate decline during last year in the holding of investments.

hi a subsequent article reference is made to the profit- earning power of the banks during- last year, but one final word may be said, perhaps, with regard to the balance- sheets as a whole: Liquidity, as expressed in the holding of cash by the banking institutions, is as pronounced as ever, while the low values at which gilt-edged securities are be- lieved to stand in the books also represents a further addition to hidden reserves. At the same time, it cannot be regarded —and it is certain that bankers themselves do not so regard it—as a favourable feature that bill holdings should have been so largely replaced by holdings of investments, hoWever gilt-edged. This is a point with which bankers themselves will certainly.be in accord, but they have been positively forced into gilt-edged securities, first by the scarcity of Treasury and other bills, arid, secondly, by the abriormal ease in money, an ease which to a certain extent has been fostered by the policy of the Central Authorities in different countries, a policy for which the banks themselves are in no way responsible.

Dec. 31st, 1934.

103,242,464 97,739,056 118,505,695 88,044,149 97,868,047 505,397,411 21,266,106 5,871,885 32,104,100 16,691,664 3,610,807 9,575,350 89,119,912 STATISTICUS.