WESTMINSTER BANK LTD.

STATEMENT BY THE HON. RUPERT E. BECKETT THE annual ordinary general meeting of Westminster Bank, Ltd., will be held at the Head Office, 41, Lothbury, E.C. 2, on Wednesday, January 29th, 1941, and the procedure this year has been slightly altered. The chairman of the Bank, the Hon. Rupert E. Beckett, has issued a statement to shareholders, which takes the place of the usual address made by the chairman at the actual meeting, and which reads as follows : In view of the official request to the public to refrain from unnecessary travel at the present time it is anticipated that the attendance at our annual ordinary general meeting will this year be smaller than usual. I have therefore decided to give shareholders th2 information to which they are entitled as to the year's accounts of Westminster Bank, Limited, in the form of this printed statement, accompanying the balance-sheet, and sent out prior to the date of the meeting. This will take the place of the oral statement usually made by me as chairman at the meeting and subsequently circulated in

print. The proceedings at the meeting will therefore be confined to the submission to shareholdess present of the customary resolutions, and to any discussion arising thereon.

In August last, our senior director and esteemed colleague, Sir Arthur Stanley, felt compelled to resign his seat on the board. He was appointed a director of Parr's Bank in 1902, and for close upon 40 years he served that institution and, later, Westminster Bank, giving regular and devoted service, in spite of indifferent health. We are grateful to him for the work he so ably performed. The New Years Honours List included the name of our co-director and chief general manager, Charles Lidbury, upon whom a knighthood has been conferred, and it is a matter of gratification to us m this Bank which he so ably serves that such a signal honour should have been conferred upon our chief executive officer.

Before commenting on the figures of our balance-sheet, I will briefly refer to the main factors which have been at work in influencing their course. The banks, in common with every other form of national activity, have had to adapt themselves to the great changes brought about by the war in the country's-peconomic life, which is being designedly controlled as regards both financial and productive resources to ensure the maximum war effort in every direction. This has largely influenced the course of banking, but other major changes, such as the decentralisation of business and the evacuation of large groups of the population, have also played important parts.

WAR-TIME GOVERNMENT EXPENDITURE

The dominating factor of the banking year is to be found in the magnitude and acceleration of the nation's extraordinary war-time expenditure, which is readily seen from the following figures. During the first quarter of last year, the total Governmental expenditure averaged approximately L7 millions a day and rose in the second quarter to L71- millions. By the third quarter it had reached an average daily figure of Lit) millions, and in the last quarter £12 millions. During the second half of the year the war effort was greatly intensified, and as an index of the speeding-up of the war machine the rising rate of expenditure is, of course, satisfactory. It is unlikely that the peak point has yet been reached, and further increases seem certain. The payments out of the Exchequer for the 16 months of war to December 31st, 1940, total no less than £4,011 millions, which has been found as to £1,515 millions from taxation and as to L2,496 millions from net borrowing. Of this increased borrowing, £1,459 millions was provided by a net increase of the "Floating Debt;' including Ways and Means Advances, Treasury Bills and Treasury Deposit Receipts—the increase in the 'Tender" Treasury Bills and Treasury Deposit Receipts being £683 millions.

In the 15 months (end August, 1939, to end November, 1940) the deposits of the Cleating Banks have increased by £437 millions, but more than Liao millions of this increase arises from the changed methods of Clearing • and the effects of postal delays upon those Clearing methods. The effective increase in Clearing Bank deposits during the /5 months from the end of August, 1939, to the end of November, 1940, is therefore in the neighbourhood of L300/330 millions and at the rate of 14 per cent, upon the pre-war deposits of the Clearing Banks.

Increases in banking deposits of this magnitude and character are unwelcome: the proper home for increased savings and increased resources of this character created in war-time by the extraordinary disbursements of Government is their direct return to Government in the form of subscriptions to the various Government loans by the persons who have the increased resources placed at their disposal by virtue of such Government disbursements. It is far preferable that this process of direct lending to the State should be expanded than that a large increase in banking deposits should occur, although it is true that such increased deposits would find their way back to the Treasury by one or Other of the various means by which the resources of the banks are made available to the Government.

The reAending by the banks to the State of the increased war-time bank:ng deposits entirely, or even mainly, in the form of long or

medium term issues has been recognised as undesirable ; hence the creation of the Treasury deposit receipts which now figure in bank balance-sheets to such a material _extent, and in our own accounts as at December 31st, 1940, show as a new item of £50 millions.

During the last war and commencing from March, 1915, Clearing Banks made special deposits with the Bank of England and con- tinued to do so until the end of 1919. These special war-time deposits carried the rates of interest which were then thought appropriate, and were held at seven days' notice and three days' notice:

TREASURY DEPOSIT RECEIPTS On this present occasion a far better system has been instituted by the Treasury to deal with the incidence of increased banking deposits. Treasury deposit receipts, which are non-negotiable, are issued to the banks. They carry the low rate of interest of one and one-eighth per cent, per annum, have a normal usance of six months, and can be used by the banks to pay for the subscriptions of their customers or those made on their own account to any public issue of H.M. Government other than Treasury Bills. They carry with them the added virtue of liquidity, as repayment can be obtained under discount at bank rate if the proceeds are at any time needed by a bank for emergency use. Thus this new type of non-negotiable security provides at one and the same time a convenient and cheap means of borrowing for H.M. Government, a desirable addition to the liquidity resources of the banks, and a method whereby the increased deposits of banks may, upon their conversion into new issues of Government loans, be transferred with the minimum of inconvenience.

The effect of the impact of war upon the resources of our own Bank and upon the disposition of our assets, and the increasing degree to which our resources are being harnessed and utilised for the purposes of the national war effort are well illustrated by the figures in the balance-sheet.

BALANCE-SHEET FIGURES Our deposits at £410 millions show an increase of 12 per cent. on the year. The combined items of cash, balances with the Bank of England and with other banks, and cheques in course of collection on other banks, total nearly £64 millions. Out of the remaining £346 millions, our funds employed almost directly on Government account include: Money at call and short notice (advances almost entirely against British Government Treasury bills), £28.6 millions ; bills discounted ( almost entirely Treasury bills), £34.6 millions ; Treasury deposit receipts, Lso millions ; investments in British Government securities, £107.2 millions, which together total £220.4 millions and represent 63 per cent. of the £346 millions already referred so. Moreover, a large and increasing proportion of our advances to customers, and indeed new advances practically without exception, provide assistance for contractors engaged on Government account, for agriculture, or for other activities vital to the war effort. Here I may mention that, in common with other Clearing Banks, Westminster Bank has its appointed representatives available to attend, for consultation on credit matters, meetings of the various War Agricultural Committees set up to assist in securing the maximum war-time agricultural production.

It is thus evident to what great extent the resources of the bank are employed for purposes of the nation.

PROFIT AND ALLOCATIONS After providing for rebate and taxation, and appropriations to the credit of contingency accounts (out of which full provision for bad and doubtful debts has been made), the net profit for the past year amounts to £1,310,629, which is £165,115 less than last year's figure. This result has been achieved in a year of great vicissitudes, and can be regarded as satisfactory. It enables us to make the accustomed allocations for dividend purposes, to transfer £300,000 to officers' pension fund and Lroo,000 to bank premises, as last year, and to increase the carry forward from L534,006 to £551,129.

With regard to our foreign auxiliary, Westminster Foreign Bank, Limited, as a result of events in Belgium and France all its branches are now in enemy territory within the meaning of the Trading with the Enemy Act, 1939, including even Lyons and Marseilles in unoccu- pied France. With one exception, all the British members of the staff managed to escape to this country, not without thrilling experi- ences, but the branches were all left in charge of an experienced and trustworthy staff of Belgian or French nationality, well able to protect our interests in so far as they may be so permitted. All the repatriated staff have, of course, been given employment with the parent bank. As the branches are now all in enemy territory, or territory so regarded, up-to-date statistical information cannot be obtained from them. A very conservative policy has, however, always been followed in connection with the finance and accounts of these branches. For many years past, profits have not been distributed, and both when war threatened and after its actual outbreak a high

state of liquidity was maintained. Loans and overdrafts were scrutinised with special care, bearing always in mind the likely effect of war upon the ability of borrowers to repay their indebtedness. This conservative policy should go far to minimise any adverse effects of the impact of war on the business.

The figures of our affiliate, Ulster Bank, Limited, show over the year a steady increase of deposits (122,592,542, against £21,143,766) and a decrease in 'endings (L8,601,252, against L9,277,460). The trading result, at £134,616, shows a decrease of £24,682 on that for 1939, due to increased overhead charges, coupled with decreased income from 'endings and lower employment rates. Though prudence has dictated a somewhat reduced dividend distribution, I am pleased to report that the business remains healthily sound and progressive.