Bank Shares for investments
Tin: record of our home banks during a period of un- exampled depression and crisis is one which has not been approached by the banks of any other country. America has witnessed a constant stream of failures, France and Germany also have had their banking troubles, and in other parts of the world it has been the exception for banking institutions to report other than serious effects from the universal depression. In this country it was not until last year that the steady recession of the trade tide affected profits to the extent that it became necessary in accordance with conservative banking policy_ to reduce dividend distributions ; but even then there were excep- tions. The events of the past 18 months have thrown into high relief the great flindaniental strength of our banks, and the confidence reposed in them by depositors and shareholders alike has been abundantly justified. Never- theless, as I pointed out when forecasting in this Supple- ment twelve months ago that the final dividends for 1931 would be reduced to the same levels as the interim pay- ments, the business and profits of a bank are dependent primarily upon the state of trade and industry, and that should be given clue weight when considering the merits of bank shares as investments. The interim dividends on account of the current year have now been declared, and in the Majority cif instances no further change has occurred-, although the past six months have not been- an. easy period for bankers. Ordi- nary loans and advances, which constitute the chief profit earning part of banking assets, subject, of course, to the extentof'the provision for bad debts have been declining, and the general fall inMoney. rates has meant that loans to the diseonnt Market and fresh purchases of bills and investments have been less remunerative. An additional factor affecting earnings has been the various national restrictions upon the free play of international trade and exchange. The reduction in deposit rates has been the big compensating. fachir. al I hough the cost to the banks is nothing like so small as Ole current London rate of per cent. suggests.
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