CO.NIPANY MEETING

NATIONAL PROVINCIAL BANK LIMITED

STATEMENT BY THE CHAIRMAN, COLIN FREDERICK CAMPBELL, ESQ.

RELATING to the accounts to be submitted to the one hundred and eighth annual general meeting to be held at the head office,

Bishopsgate, London, E.C. 2, on Thursday, January 30th, x941, I am taking the unusual course of sending my observations on the accounts with the report and balance sheet as at December 31st, 1940. So many of our shareholders are engaged on important Govern- ment work and others may find travelling to the City inconvenient that I hope this change will commend itself to all.

At the annual meeting on January 30th, 1941, only the necessary business will be transmitted and no further comments will be made by me as chairman. Before dealing with the ordinary affairs of the Bank, it is with much regret that I have to report that during last year we lost the services through death of our esteemed colleague, Sir Alfred Lewis, who died on February 21st. For a number of years Sir Alfred Lewis occupied the position of chief general manager and later he was elected a director of the Bank and finally became a deputy chairman. Sir Alfred rendered valuable services to the Bank and gave to it a full measure of ability and experience. I also have to report the deaths of two of our local directors who were much attached to the Bank throughout a long period of time, Sir Prince Prince-Smith, Bart., who died on July 2nd, and Mr. D. A. Aubert, who died on June 30th.

CURRENT, DEPOSIT AND OMER ACCOUNTS There have been notable changes in a number of items in the balance sheet. At £380 millions deposits show an increase of 1,:44 millions compared with a year ago and now stand at a record high level. Our experience in this respect is shared by the other great banks and the general expansion is due to the increased volume of Government borrowing and expenditure for war purposes.

BILLS DISCOUNTED, TREASURY DEPOSIT RECEIPTS, INVESTMENTS As is well known, the portfolio of bills discounted, which shows a reduction of £12 millions, has for many years consisted largely of British Government Treasury Bills.

A new item in the balance sheet is Treasury deposit receipts, of which we hold at present £31 million. The advantage of this method of borrowing by the Government is that it places a check on any undue increase in the floating debt through Treasury Bills.

In view of the substantial increase of funds at our disposal, repre- sented by deposits, we have augmented the Bank's investments by no less than ,C38 million. Practically the whole of the investments are British Government direct liabilities, and I can say again that a large proportion of our holding is redeemable within a few years. The total of the above three items amounts to the very substantial sum of £192 millions, or 50.6 per cent, of our customers' deposits, and is a complete answer to those who sometimes ask rather thought- lessly what banks are doing to help towards financing the war. In addition to this direct support of the national finances, our money at call and short notice which stands at over £19 millions is nearly all lent to the market to assist in carrying British Government Treasury Bills.

ADVANCES Our main earning asset, advances to customers, shows a reduction of nearly £20 million compared with the year-end 1939, and now represents only 31.3 per cent, of deposits as against 41.4 per cent. Banks generally have witnessed a diminution of advances during the year and in the case of this Bank nearly all classes of loans have contributed to the decline.

Owing to the control exercised by the Government in various commodity markets, the accommodation which we have been in the habit of extending to merchants in connexion with the importing and holding of stocks is no longer required. Another factor is the cessation of ordinary activities in certain trades, such as those normally engaged in building and estate development In addition there are, of course, the restrictions imposed by H.M. Treasury on borrowings by private individuals. These restrictions have been freely accepted by the banks and their customers as being in the national interest.

On the other hand, as a partial offset to these decreases we have lent substantial sums of money to those engaged in the production Of armaments and to other industrialists whose businesses play an important part in our war effort. Indeed we may say that during, the past year our fresh advances have been almost entirely confined to Purposes connected with the prosecution of the war. The needs of agriculture have figured rather prominently in the public Press and in this matter special steps were taken by the banks so that no farmer who is in any way credit-worthy could say that his farming operations had been hindered through want of financial facilities on reasonable terms.

These and other factors may be expected to persist throughout the Period of the war, but after the war there is little doubt that we shall be called upon to play an important part in financing the change-over of the vast industrial machine from war-time to peace conditions. Our branch offices in the Channel Islands have unfortunately CalSed to function, so far as their association with us is concern,

since the occupation of the Islands by the Germans, and our sympathy goes out very sincerely to oar friends there in the distressing circum- stances in which thcr are placed. We are doing all that is possible to safeguard our interests there and we have made such provision as we thing necessary in view of the present situation. We can only assure our friends that we look forward to the day when we shall be able to resume our relations with them.

With one exception, the remaining items in the balance sheet call for no special comment. This exception is our holding of so per cent. of the capital in Lloyds and National Provincial Foreign Bank, which has carried on a business in England, France, Belgium and Switzerland for a number of years. It may be remembered that the bank was started by Lloyds Bank in 1911 and we joined them in 1917 by taking a 50 per cent. interest in its capital We have no information as to the procedure now being adopted by the Germans in regard both to the assets and liabilities of the bank in France and Belgium, but I may say that inasmuch as the capital of the bank is held in London in sterling, there is no reason for thinking that this, at any rate, is not intact. Consequently our share holding is taken at par in the balance sheet.

PROFIT AND Loss ACCOUNT: DIVIDEND

The statement of profit and loss discloses a profit of £1,697,538, which is less by L21,445 than the profit we were able to earn in 1939. Having in mind the heavy expenses we have had to meet

in many directions, notably those occasioned by the migration of our customers' businesses and continued A.R.P. expenditure I think it will be agreed that the result is a great deal better than might well have been expected.

At this stage it is not possible to comment with any degree of certainty on the effects of the War Damage Bill, which as yet has not become law. It is an extensive and somewhat complex measure, but the principle of affording protection to the owners of properties of all classes is one which will be generally welcomed. The Bank will be affected from more than one angle and the contributions which we shall be called upon to make under the scheme will be substantial in amount.

The dividend is at the rate of 15 per cent., being the same as for several years past. It will be noticed also that Lioo,000 is transferred to premises account and L150,000 to pension fund.

THE BANK'S OPERATIONS In common with other industries the banks have experienced inconveniences and difficulties in maintaining their services during 1940. A year ago I made reference to plans we had made before the war to meet possible eventualities, and mentioned that all the banks had agreed to co-operate in rendering mutual assistance should the need arise. We acknowledge with gratitude timely assistance afforded .us by other institutions, and are glad that we have been able on occasion to give help to others. The arrangements made in advance have been fully justified by our experiences of last year, and I am happy to be able to tell you that although a number of branches have suffered more or less serious damage from enemy action, we have been able to give virtually uninterrupted service to our customers WORK OF THE STAFF The work of the management and staff calls for very special mention by me. However perfect schemes for the future may be, their successful execution depends entirely on those individuals charged with the responsibility of carrying them out properly, and from this point of view the manner in which extra burdens were cheerfully assumed by one and all has been beyond praise. In addition to the day's work—often after a tedious journey to and from the office—large numbers of the staff up and down the country give unstinted voluntary service to the Bank and to the community, in A.R.P. work, home guard, special constabulary, nursing, ambulance, fire-watching and other services. Their strength of purpose is derived from their appreciation that banking services form a vital section of the nation's war economy and they share the determination of the nation to play a full part in defeating the enemy.

As anticipated, our permanent staff has been further depleted owing to the requirements of the military authorities, and we now have approximately 2,000, or about 28 per cent, of our pre-war male staff serving in the armed forces. Shareholders will be interested to know that over 360 of this number hold commissioned rank and that one D.S.C., two M.C.s, one D.F.C. and one M.M. have already been gained. I much regret to say that there have been casualties, both among the service and civilian members of the staff, but the number of those killed by enemy action is relatively small. The loss of experienced men has also thrown a heavy burden on those who remain with us and on the staff of both sexes who are temporarily filling vacancies.

THE OUTLOOK As we look back on the course of events in our country during 1940, we recognise that it was a year of grievous trials successively endured, of mistakes rectified, and of unshaken faith in the final triumph of our cause. The progress of military events during 1941 lies beyond our present knowledge, but it would be prudent for us to assume that whatever successes our arms achieve, our qualities as a people may be more severely tested than ever before.

Notable progress has undoubtedly been made in switching over the nation's economy to production for war, but much remains to be done before we can be satisfied that we are putting forth our maximum war effort. Consumption of goods for civilian use will be cut still further and the labour and materials thus liberated devoted to wax ends.

The urgency of increasing our export trade, particularly with the United States of America, will continue in an ever-increasing degree. The people of that great country are rendering us magnificent help in our struggle and the recent declarations of policy made by the President of the United States are of the utmost value and importance.