C05IPAN1 N'EET.NG

ABBEY ROAD BUILDING SOCIETY

BENEFITS FOR THE SMALL BORROWER POSITION FURTHER STRENGTHENED SPEECHES BY LORD STAMP AND SIR HAROLD BELLMAN

THE annual meeting of the Abbey Road Building Society was held on Friday at Wigmore Hall, Wigmore Street, London, W.

The Right Hon. Lord Stamp, G.C.B., G.B.E., the president, was in the chair.

The president said, in the course of his address: Ladies and gentlemen,—When the accounts for 1939 were being considered we were only dimly discerning the outline of wartime finance. Every line of the 1940 accounts now makes the shape of it clear for all to see. I tried to show that the inexorable machine of Government finance would make nearly all savings, however different their origin and however devious their route, ultimately reach the Exchequer.

It was indicated that while advances for new buildings would necessarily come to an end, there 'were still important functions that must be continued and regulated and that the machinery existed for doing this in the best way. In the first place, the continued existence of the building society machine ensured that an important fund of annual savings through repayment obligations should be maintained—the habit would not be undermined nor the funds dissipated. The increase in the building societies' direct investments in War Loans is evidence of this.

THE ORDINARY MAN'S SAVINGS

It must never be forgotten that this is a machine for encouraging the small savings of the ordinary man, to lend them to ordinary men, and that, indeed, for the first of all purposes of social society and advantage—the home.

Let us look then at the second point. Suppose the ordinary man lent his small savings direct to ordinary men. Can you visualise what would now be happening? Many a small borrower wants some respite in his bargain, a retardation of interest, or other treatment particularly adapted to his case. The lender might often be no better off himself, equally buffeted by. fate, and no relief could be shown to the one without hardship to the other. The lender would be either unable to extend help at all, or have to transfer the whole hardship to his own shoulders.

Instead of this, savings risks and repayment risks are alike pooled in the society. Its directors have the new task of administering with discrimination new principles and rules, tempering many varying winds to many lambs of differing degrees of shomness, upon well- worked-out and uniform yet sympathetic lines, weeding out the spurious claims.

In the third place, a system of individual mortgages among ordinary men, even supposing it were a possible system, would expose the lender to appalling. geographical risks. Not only might his security be almost valueless when standing, because of its location, but upon its loss or damage he would be equally engulfed in the misfortunes of the borrower—which even the war damage provision could not wholly shield him from. As it is, every lender's money stands on a thousand legs, and if many of them go, will still stand. The building society movement spreads the geographical risks to the advantage of all. The movement, therefore, does three things in wartime of great value for the ordinary man. It prevents the peacetime savings habit from distintegrating and steers it straight to its primary goal. It carries the weight of financial vicissitude so that no one is embarrassed. It pools the risk of loss over a wide field.

COMPARISON WITH 191Q WAR

He proceeded to review the position of national finance after 18 months of this wgr, comparing it with the first 18 months of the last. war, and went on to say: A real difference exists and a resolute action the Government has completely overborne laisser/afire on this occasion, but the lesson of the war so far is that the best results are like'y to be achieved if enough of the normal functions of particu- lar financial machinery are left to work freely to enable the machine " t;ck-over," and that cutting.- off the complete supply or outlet will always have bad reactions. For example, last June, with moral suasion acting against the great financial institutions purchasing any- thing at all but war loans, on supposed patriotic grounds, we found the normal offerings of industrial securities arising through realisation for estate duty payments and other inevitable purposes met with no demand at all, and prices fell catastrophically.

EFFECTS OF FALL IN INDUSTRIALS

But the effect of an excessive fall in industrials may be very wide- spread , first it lowers the total value of estates, and therefore at lower tax rart: their yield to the Exchequer ; secondly, it undermines the integrity of thousands of balance-sheets which carry such securities 3' the conventional methods of valuing securities ; thirdly, and very vnportant, it lowers the value of collateral against bank advances, and under local routine automatic procedure might lead to calling in of bans and forced realisation of the stock, leading to a further fall of ',Itses. Fourthly, it makes an undesirable and absurd gap between uovemment and industrial yields, leading to unhealthy consequences. of lesson for building- societies' activities is that a certain minimum of ordinary business should flow through, so that the integrity of the mechanism may not fail.

He moved the adoption of the report and accounts. Sir Harold Bellman (chairman and managing director), in seconding the resolution, said: Ladies and gentlemen,—In each of recent suc- ceeding years, as the country has encountered crisis after crisis, we have taken satisfaction in the society's successful emergence from these tests. We may do so today. The justifiable confidence of our investing members has been maintained and the loyalty of our borrowers has been beyond praise.

A new department has been opened to render the fullest possible technical service to borrowers who have the misfortune to L.-ye their properties damaged. It has been gratifying to receive the warm appreciation of these members for the sympathetic treatment of their difficulties.

STRENGTH OF THE ACCOUNTS

Turning to the accounts, if the story requires a heading I think a single word selects itself—strength. Taking our withdrawal ex- perience as a pointer, the share money withdrawn showed a reals.s.tion, compared with 1939, of f,1,600,00o. On a weekly average basis, the share withdrawals declined from l.;90,000 in 1939 to E.58,000 in 194o. Deposit withdrawals also were materially lower, having fallen from I.:3,800,000 in 1939 to £2,400,000 last year. A comparison with the last normal peace year is also reassuring, for the total withdrawals in 1940 are practically the same as in 1938. In the middle of last year the Government through the medium of Statutory Rules and Orders No. 1137, made a regulation under which building societies were empowered to require a period of six months' notice in respect of all withdrawals.

The object of this was to contribute within the limits possible towards uniformity among societies in regard to the terms of with- drawal. As such the order was a factor making for stability in the building society position as a whole. The society, in common with other units in membership of the Building Societies Association, is operating the order with the discretion and within the latitu..e per- mitted. Special care is taken to secure that no member seeking a withdrawal is involved in any hardship or even serious inconvenience.

WITHDRAWAL POSITION SATISFACTORY We have not been embarrassed, for our investing members during a year of war's alarms have remained steady and confident and thus enable us to report once again that the withdrawal position is very satisfactory. This is especially true in view of the extent to which the savings withdrawn were replaced by new savings. If new share money is taken as a barometer of confidence, then we are indeed fortunate in the trust imposed in us by our members.

The vast majority of borrowers have maintained their normal repayments. In cases where the covenanted repayments could not be maintained the society has given sympathetic consideration to every mortgagor on his merits. There is no known case of any reasonable borrcwer who has not felt satisfied that we have willingly recognised and met his special difficulties. (Applause.)

WAR DAMAGE Bin.

The War Damage Bill, which has now reached an advanced stage on its journey to the Statute-book, is a factor of considerable importance in relation to building society mortgage securities. Building societies welcome the general principles of the Bill and appreciate the adminis- trative courage of the Government in bringing it forward. In framing the Bill, however, the Government have clearly regarded it as an emergency measure in which expediency could be combined with carefully thought-out principles. As indirect (though only as indirect) beneficiaries under the Bill the societies were more than willing to bear a reasonable share of the burden.

BURDEN ON BUILDING SOCIETIES As the Bill was drawn when it was considered in Committee, the burden on building societies as a whole was estimated at f,,zo,000,000 spread over five years. After the Committee stage, however, the Government extended the range and increased the proportion of the contributions to be borne by the mortgagee, with the result that an additional £1,500,000 now falls to be contributed by building societies. Thus the burden has been increased—without, as it seems to me, adequate justification—until it has now assumed formidable propor- tions, especially when considered against the other wartime burdens falling on societies. While it is appreciated that little can now be done by way of mitigation under the Bill, it is hoped that the Government, remember- ing that the sharing of the contribution operates chiefly against building societies, will be able to provide societies with some com- pensating relief in other directions.

HALL-MARK OF STABILITY

Looking at the balance-sheet as a whole, this bears the hall-mark of stability. It embodies the caution of the past as a token of the strength of the future. The total assets stand at virtually £50,000,000. On the one side there are the impressive reserve funds totalling £2,850,000, and it will be noted that these are real reserves in that they are independently held in trustee securities and cash. Turning to the other side, there is £45,880,000 invested in over 94,000 mortgages, the overwhelming proportion of which are small mortgages. The balance of the assets is principally made up of a liberal margin of liquid funds, consisting of investments and cash. The cash figure of £1,380,000 which the society had in hand at December 31st, 7940, is the highest cash balance ever shown in a balance-sheet of the society. This reassuring degree of liquidity is a further indication of our readiness to meet our members' reasonable needs.

The society confronts the uncertainties of 1941 with the same sober confidence as that with which it has faced other difficult years. Whatever the circumstances which may enforce economy on the nation in those days to come, we may hope for a continuance of the policy of improving housing conditions. I am confident that the Abbey Road will be an effective collaborator in the furtherance of this ideal. (Applause.)

The report and accounts were unanimously adopted.