Scottish Banking and the Trade Outlook
BY A SCOTTISH CORRESPONDENT.
So far as Scotland is concerned the current year has few outstanding incidents and no dramatic interludes.
Conditions hitherto have been comparatively uneventful, and the more settled aspects of labour, with an improved relationship as regards employers and employed have tended materially to dispel the dark cloud which the industrial deadlock of 1926 east over its immediate successor.
The banking " season " will open in November, when the annual report of the Royal Bank of Scotland makes its appearance, and the balance sheets of the remaining seven Banks will constitute a series which will disclose results identified with what is generally regarded as a very satisfactory year. The Bank rate operative over the period has been favourable to banking profits, and it is generally believed that deposits, if not materially increased, have at any rate been substantially maintained. One forecast may be allowed with some degree of certainty. A renewed expansion of trade loans is likely to be a feature of forth- coming balance sheets, with also a probable increase alike as regards acceptances and commercial bills. If any difficulty confronts Scottish banking to-day, it is perhaps the procuring of fresh deposits in Scotland, at existing rates, to furnish the enhanced demands of borrowing clients. Already several of the banks show general advances equal to 50 per cent. of their deposit totals, and no doubt the policy of branch extension in many outlying districts, with window cards setting forth the fact that the humblest depositor is welcome, reflects the requirements identified with lending centres. The phenomenal growth of savings bank deposits in recent years has not been overlooked, and it is just possible that in the near future the joint stock banks may take a leaf out of their neigh- bour's book, and inaugurate departments to attract small depositors by issuing passbooks for interest-bearing deposit accounts, etc. At present, and for the future, the joint stock banks, if they are to retain and expand their deposit business must cultivate to a much greater extent than hitherto a clientele identified with the industrial classes, and that they are fully alive to the changed ownership of money is evident in certain schemes now believed to be under consideration to meet the require- ments and preferences of this section of the community.
TRADE CONDITIONS.
Trading conditions upon which so much depends are distinctly better than they have been for a considerable time. Progress is slow but the tendency is in a right direction. In the coal trade although progress still leaves much to be desired, prices would appear to have now reached a level for export at which it is reasonable to expect good results to follow. Some months ago, for example, the Swedish State Railways, whose former purchase was almost wholly from Poland, placed contracts with British exporters for something like 170,000 tons, of which, roughly speaking, one third would be supplied by Scottish collieries. In well-informed quarters it is thought that this may be the forerunner of renewed interest on the part of Scandinavian countries in Scottish fuel. Shipbuilding yards have recently been successful in securing a fair amount of orders including the new 25,000 ton Canadian Pacific liner, ' Empress of Japan,' the keel plate of which has now been, laid at Govan. As much of the tonnage at present afloat is of a more or less obsolete character, the idea is prevalent that ship- owners may take advantage of present conditions—and What may be regarded as bed-rock prices—to modernize their fleets to cope with revivals in transport services. Probably one of the main difficulties at the moment lies In the plethora of competing systems of propulsion. The current year has been fruitful in inventive activity. Many new ideas and improved methods are in course of development and engineering firms possessing the neces- sary enterprise and foresight have good prospects ahead of them.
A curve in the right direction as regards the heavy Industries- is reflected all- down the line, and the result has been .a _demand for fresh _credit. This is fully evidenced in the change over from Government securities to general advances in banking balance sheets. This aspect of recent reports has scarcely received the recognition which it merits. The narrow margin between rates obtainable from Government securities on the one hand, and over- drafts on the other—in many cases only a fractional surplus—does not allow much provision to meet the higher risks involved, and the much heavier costs of branch supervision, when trade loans . are maintained on an upward grade. Much ill-informed criticism would be silenced by an honest analysis of the assets details of the Scottish balance sheets over a series of years.
CURRENCY ADJUSTMENTS.
The next few months will include two developments of interest. The first of these will he the new currency issue: In all probability the change over from the Treasury to Threadneedle Street will not, to any appreciable extent affect the existing circulations of the Scottish banks. The note issue in Scotland has remained remarkably steady at round about £20,000,000 for a considerable time. In his presidential address to the Institute of Bankers in Scotland in June last, the general manager of the Union Bank of Scotland put forward the view that in deference to the historic traditions of the north-country banks, it would have been a graceful act on the part of the Government had the existing circulation been raised to a legal tender status and the privilege of issuing ten shilling notes been conceded. The first of these suggestions was probably too sweeping for practical legislation, but little objection could be taken to the second. So far, however, no change of any importance in existing conditions seems to be contemplated, and as all the banks —with one exception—have now a note in style and size adapted to public convenience, in all likelihood the present currency will continue to blend freely with that issued by the Bank of England. Scottish bank-notes are not, of course, issued except in the country of their origin, but if they do find their way to London they may be readily exchanged for currency notes of any of the city offices of the north country banks.
LONDON CENTRALIZATION.
The decade since the War has in a very appreciable degree linked- Scottish business to a London control: The great railway systems have now their base in the Metropolis. London combines have superseded indi- vidual ownership in the case of many shops and ware- houses, and collateral with this development, one half of the banking institutions in the north are now owned by units of the " Big Five." The tendency of this move- ment is to utilize in ever increasing measure Scottish money for London requirements. It would be interesting to know, if it were possible, just what amount is trans- ferred weekly by Scottish offices to London correspondents: This changing aspect of affairs has led the banks in Scotland to devote considerable attention to their London interests, and several important expansions have been associated with recent years. The Scottish banking temperament is decidedly conservative in cast—slow to move and fearful as regards taking any step which has the possibility of regret as an aftermath. This conser- vative disposition has proved a strong bulwark in the past, but the shifting of the geographical centre in the general finance of post-War industry has led to a widespread revision of Constitutions, and the procuring of fresh acts and charters to cover new departments. The extensive powers which the banks now enjoy, and which they exercise in directions like trustee and executory business, etc., give them excellent opportunities for serving their clients in ways entirely unknown to a former generation, and through a network of branches which leaves no part of Scotland un- touched, and a capable representation m the city, Scottish trade enjoys in ever increasing measure the resources made possible over a long period of years, during which many of the best brains of the country have laboured in accumu- lating resources to fortify enterprises which have gained for Scotland such world-wide renown.
Previous page
