COMPANY MEETING

NATIONAL PROVINCIAL BANK LIMITED

CONTINUED EXPANSION OF BUSINESS IMPORTANCE OF MAINTENANCE OF LIQUIDITY AND STRENGTH MR. COLIN F. CAMPBELL'S REVIEW THE annual general meeting of the shareholders of the National Provincial Bank Limited was held on January 24th at the head office, 15, Bishopsgate, London, E.C.

Mr. Colin F. Campbell (the. chairman) said : My lords, ladies and gentlemen—I am pleased to be able to say that our business as repre- sented by the number of accounts opened continues to expand.

Current, deposit and other accounts amount to £310,094,154, which is £10,152,260 lower than the figure quoted in the previous report. This reflects the general tendency of bank deposits to fall, a feature which was in evidence particularly during the last few months of the year. The weekly average of our deposits, on the other hand, was slightly higher than in 1937.

On the assets side, coin, Bank Notes and balances with the Bank of England stand at £34,320,774, and amount to I I.I per cent. of our deposits. This large sum, I would remind you, is wholly unpro- ductive—in fact, the movement of notes and coin to meet our customers' requirements costs a large sum annually. Money at call and short notice stands at £17,991,279, and bills discounted at £32,189,714. As would be expected in view of the fall in deposits, these balances are somewhat lower than those of a year ago. The return to the bank on these items continues to be very small. The Treasury bill rate for the year 1938 averaged nearly 12S. 3d. per cent. against IIs. 2d. in 1937. Investments have been reduced in volume during the year. Our policy has been to hold mainly redeemable stocks, a large percentage being short term, though this has involved some sacrifice of income. This course does afford some protection from violent fluctuations, but even short-dated securities are subject to considerable changes in price.

Advances at L139,586,103 show a small decline compared with a year ago, but here as in the case of deposits the weekly average for the year was in excess of that for 1937. The figure represents 45 per cent. of our deposits as compared with 43.9 per cent. at the end of 1937, and reflects the attitude adopted by the bank towards its customers who may require additional funds for the development of their trade or business. We do our best to support industry in every possible way, and it is very gratifying to receive many assurances that our help through troublous times in the past has resulted in many trading concerns coming through to a period of relative prosperity.

THE NET PROFIT

The profit and loss statement discloses a net profit of £1,771,785, as compared with £1,874,959 last year, which, having regard to the difficult times through which we have passed and the demands on us in the way of ever-growing expenses and taxation is, we think, a satis- factory result. There is an increasing volume of work passing through the banks which entails an addition to expenses for which up to the present we have not been able to obtain adequate remuner- ation, and I doubt whether it is fully appreciated how greatly the services rendered by the banks have been extended in recent years.

The dividend continues at 15 per cent., as before, and after allo- cating £zoo,000 to bank premises and £25o,00o to pension fund, there remains to be carried forward £573,588, which is practically the same figure as last year.

DOMESTIC AFFAIRS

In taking stock of our position at the end of 1938, the feeling dominant in all minds must be that although ground has been lost in some directions during the year, the position might well have been disastrously worse. We faced the imminent possibility of war, with all its unspeakable horrors, in September, and the arrangements we were called upon to make during the crisis threw a heavy burden upon the management and the staff of the, bank, besides involving us in considerable expenditure.

Looking back now on all that took place during the eventful fort- night of September, it is some consolation to know—and the know- ledge should give us confidence for the future that our great financial institutions can sustain the shock of such a grave crisis, although it should be recognised that so far as the Stock Exchange is concerned minimum prices were introduced in the gilt-edged market. These happenings clearly indicate that in these uncertain days nothing is more important than that the great banks of this country should continue to maintain a position of liquidity and strength, even though this involves sacrifice of earning power.

PROVINCIAL CLEARINGS

Domestic trade, according to reports obtained from our branches in all parts of the country, has been fairly well maintained throughout the year.

The provincial clearings of Bradford, Liverpool and Manchester, to which I have just referred, show declines of 20.7 per cent., 24.3 per cent. and 15.9 per cent. respectively. The prosperity of these three great centres is largely dependent on the woollen and cotton textile industries, and the deterioration indicated by the above figures is related in some degree to the great contraction of the export trade in textiles.

The position of the Lancashire cotton trade in particular, so far as exports are concerned, is grave, and it is to be hoped that the enabling bill now being considered will have the effect of bringing back a measure of prosperity to that sorely stricken industry.

INDUSTRIAL CONDITIONS

It I may refer to some of our important industries other than the textile trades, our branches report that the manufacture of finished goods for the home market has been well sustained, and the falling off in exports is largely attributed to international conditions.

The iron and steel industry, apart from undertakings occupied in the manufacture of special products, has experienced a less satisfac- tory year. Broadly speaking the great activity of 1937 was carried well into the first half of 1938, but the second half of the year was disappointing. The reasons generally given are the high prices of pig iron and steel and consequent slackening of demand and accum- ulation of stocks. The recent reduction in the prices of a considerable range of these products is a welcome recognition of the fact that the activity of these basic industries is to a large extent conditioned by the replacement and extension demands of all other industries. It is permissible to hope that the wisdom of this step will be appreciated by other industries whose main outlet lies in the same direction.

Engineering, on the other hand, is more active now than a year ago and rearmament is given as the mainspring of this activity.

SHIPBUILDING AND FOREIGN COMPETITION

Shipbuilding, generally speaking, has been fairly well occupied in completing contracts, but the outlook is not reassuring. Construc- tion of both large and small vessels on Admiralty account has kept some areas busily employed, but new orders for mercantile craft have been disappointing, although as an exception a contract has just been placed by Turkey for xi ships.

This well-equipped and efficiently managed industry is seriously handicapped by unfair and subsidised foreign competition, and in view of its vital importance to the nation it is to be hoped that early steps may be taken to ensure that it receives a fair share of the con- struction and repair of merchant vessels.

Shipping has been seriously affected by the decline in the volume of world trade : idle tonnage being now much greater than a year ago.

One of our largest industries—agriculture—is in a depressed state, despite the subsidies. Farmers of both arable and pasture land have two main complaints, the price of barley and the price of sheep, both of which are much lower than 12 months ago. Districts where con- centration of these two commodities occurs are very depressed. Elsewhere, though other agricultural prices too are lower, the mixed farm seems able to hold its own.

ENTERTAINMENTS TAX

It may not be realised that the box-office receipts can fairly be estimated at £50,000,00° per annum gross, of which L5/6,000,000 passes to the revenue by way of entertainments tax, nor is it realised that the admissions to cinemas amount probably to 23,000,000 in a week, or, say, i,zoo,000,000 in a year. Films are produced to meet the tastes of every class in the com- munity, and the development of educational films is one which it is hoped may receive increased attention. There is no doubt that much good can result from showing pictures which draw attention to the beauties of Great Britain as a country and extend knowledge of its trades and industries.

Last but not least, in this industry alone it can be stated that from the point of view of labour, direct employment is given to not less than 200,000 people, while indirectly employment is given to a much larger number. I think it may be taken as a matter for satisfaction that this bank has been able to play an important part in the development of this new form of entertainment and education. I cannot pass by the domestic situation without reference to the unemployment figures. These, unfortunately, have been a good deal higher in 1938 than the average of 1937, and as far as gross figures go, we are in about the same position as we were in the summer of 1936. Of the additional unemployed, one group of industries—textiles (mainly cotton and wool)—accounts for an unduly large share. It seems to be certain that as consumption in the home market has been fairly well maintained, the increase in unemployment over this period must be mainly attributable to the contraction in our foreign trade.

FOREIGN TRADE

It is sometimes pointed out that the volume of our domestic trade is much greater than that of the export trade, and the inference is drawn that more attention should be paid to developing the home market. Without in any way minimising the importance of the home market, it must be said that this idea is superficially as attractive as it is inaccurate, particularly when conditions in overseas trading are as difficult as they are at present. A vigorous and flourishing export trade is, in the case of this country, a condition of the very existence of domestic trade. Any appreciable contraction of the volume of our foreign trade must reduce general prosperity and be reflected sooner or later in a decline in the general standard of living. The difficulties which face exporters are not peculiar to this country. The volume of world trade has not yet regained the level of 1929 and present international competition is confined to a field not only smaller than in pre-slump years, but one which should, because of the increase of populations of most countries during the last ten years or so, have expanded well beyond the 1929 level. The real task which confronts the great trading nations is not that of seeking to increase individual shares of a restricted market, but to do (Continued on page iso) COMPANY MEETING

NATIONAL PROVINCIAL BANK LIMITED

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away with the impediments and restrictions which still limit the total volume of international trade. If we may be guided by the League of Nations' latest published analysis of the quantum of world trade, the United Kingdom has more or less held its proportionate share over the last nine years.

INEQUITABLE COMPETITION

Although we still maintain our share of world trade, we cannot ignore the existence of practices new to the conduct of international commercial affairs, which distort normal economic channels of trade and may eventually inflict lasting damage upon our export industries. None the less, although there is some reason to think that inequitable and subsidised competition is not likely to be permanent, we must in view of the paramount importance of our export trade, be prepared by concerted action of industries concerned, together with Government support, to meet such competition, and it is satis- factory to know that discussions have already taken place with this end in view.

The knowledge that our leading industrialists are placing their unrivalled experience at the disposal of these representative bodies is a factor that cannot be over-estimated.

THE EXCHANGES

When considering the causes which have brought about the reduc- tion of our foreign trade over the past year, it cannot be doubted that over-valuation of the pound played some part. This factor has prob- ably been more or less adjusted at the present exchange level, but human affairs are proverbially uncertain, and irregular fluctuations in the real worth of independent currencies are to be expected. Our task is to endeavour to curb and compensate them while recognising that we cannot abolish them. Reasons connected with the crisis of 1931 led to a policy of low money rates inside the country and left disparities between the external and internal values of the pound to be manifested in fluctuating exchanges. The responsibilities placed upon the management of the Exchange Equalisation Account were given by the Chancellor of the Exchequer when he said that the object of the Exchange Equalisation Account was to make the exchanges more steady and to aim at restraining undue oscillations. To carry out this function is not so simple as to state it, for it implies an unerring diagnosis of the causes of unusual pressure on the exchanges. It implies an immediate recognition of an over-valuation or an under-valuation of the pound. It implies exact knowledge of the nature of an over-valuation or under-valuation—whether it is likely to be temporary or long-lived. And it also implies, having regard to the International Currency Agreement, the acquiescence of other nations in such correctives as our own authorities may think desir- able. The task of those who " manage " our money is thus, from the external point of view, a formidable one.

The Anglo-American Trade Agreement is a matter of the utmost importance and we are justified in believing that it will have a far- reaching effect of the most favourable kind on the trade relations between the two countries and indeed with the British Empire, especially as traders can now take a three-year view of conditions. Article 18 relating to currency fluctuations is one that is worthy of particular notice in view of its fundamental importance.

THE OUTLOOK

When we come to consider the future course of world trade, we are compelled to adopt a short-term view in face of international uncertainties with which we are surrounded. Given normal condi- tions, the guiding factors are price tendencies, stocks of goods for consumption, and general demand.

The course of both wholesale and retail prices during the past 12 months would seem to indicate that both have reacted to an extent that justifies us in thinking that prices are now on a much firmer basis.

The contraction of demand of the United States in world markets was a most important factor in the fall and prolonged weakness of a large number of commodity prices, and it is reasonable to expect that a sustained resumption of activity in that great country would rend to strengthen world prices and restore confidence to the primary producing areas. There has already been a marked recovery in the United States which I hope may gather strength, founded as it is on a broad basis of expenditure on capital goods.

SITUATION MORE HEALTHY

Thus on the score of prices and stocks there is justification for the view that the situation at present is more healthy than it was a year or so ago when prices were still falling and stocks were accumulating.

A further consideration which cannot be ignored when looking into the future is the enormous expenditure to which the country is com- mitted in connection with rearmament. I am not thinking so much of the provision of the money required, for this can be provided without excessive strain, more especially in view of the fact that the people of this country have expressed themselves quite clearly that it is their wish that the country should be strong enough to resist all eventualities.

When we look nearer home and think of the series of shocks and crises to which the world in general was exposed in 1938, is it too much to hope that the desire for peace—so strong in this country— which has been increasingly made manifest by the plain men and women living in the great and powerful countries in Europe will prevail over all other considerations, and that both they and our- selves will be enabled to live our lives and to carry on our daily duties this year without the spectre of war being ever before us ?

The Report and Accounts were unanimously adopted.