COMPANY MEETING

NATIONAL PROVINCIAL BANK

RECORD DEPOSIT FIGURES MR.C. F. CAMPBELL ON CURRENT PROBLEMS

THE ro7th annual general meeting of National Provincial Bank, Limited, was held on January 30th at the head office, 15, Bishops- gate, London, E.C.

Mr. Colin Frederick Campbell (the chairman) said: My Lords, ladies and gentlemen, I will, with your permission, take the report and accounts as read. The statement of accounts which I am able to submit to you to-day is a great deal better than might have been anticipated so soon after the outbreak of a great war.

Our chief liability, current deposit and other accounts, at £336,000,000 is £26,000,000 in excess of the balance-sheet figure of a year ago and is in fact a record in the history of the bank. Larger deposits are a common experience of all the banks at the present time and are principally due to the heavy Government

expenditure time, has occurred over the past 12 months, particu- larly in the final quarter of the year. There has been a proportionate rise in our main cash item, which at £36,600,000 shows an increase of rather over £2,00o,000 compared with last year. Money at call and short notice stands at over £19,000,000, showing the same proportion to our deposits as a year ago. Bills discounted at ao,000,000 are up by no less than £28,000,000, but it may be noted that our monthly average holding of bills has fluctuated considerably from a minimum of £25,400,000 to a maxi- mum of over £58,000,000.

The year has witnessed a reduction in the weight of outside money, particularly funds of foreign origin, seeking investment in bills and short-dated securities, and this fact, coupled with a steady increase in the offer of Treasury bills, has brought a welcome change from the =remunerative level at which short money rates have stood for some years. The average return on Treasury bills has risen from 12s. 3d. for 1938 to £r 4s. 3d. per cent, per annum for the year 1939. Some 55 to 20 per cent, of the bank's resources are of necessity lent at short notice and invested in bills, and the improvement in rates this year has helped to offset re- duction in income elsewhere and the increased expenditure which we have had to face.

The advances are practically unaltered at the figure of £139,000,000. Funds advanced by the bank fall into many and varied categories, and it was obvious to us that whereas the posi- tion of many of our borrowers might remain unchanged, the Initial shock of the outbreak of war was bound to have adverse effects on the situation cif many of our customers through no fault of their own. We have always found in similar circumstances in the past that a patient and sympathetic understanding on our part of our customers' difficulties has enabled them in due course o readjust themselves to altered conditions, and I do not doubt we shall have the same experience on this occasion.

For obvious reasons no one will doubt the wisdom of the authorities in instituting a strict and detailed control over the issue of capital in war conditions. Yet with the gradual gearing up of ur industrial machine to maximum output, the need for addi- onal capital of all kinds is insistent. In many directions the State has assumed responsibility for large expenditure on fixed capital in connexion with war industries. There is, however, a vast field here the services of bankers in providing working capital may be re fully utilised. I have in mind the provision of temporary ante to enable producers of food, clothing and munitions to idge over the period between production and the receipt of pro- eds from the various purchasing authorities, and the banks are eady to assist to the utmost for this purpose.

The needs of agriculture have been brought prominently to our once. The cost to farmers of ploughing, cultivating and har- sting an additional two million acres is a formidable one, to- ards which the grant by the Government of £2 an acre goes only little way, and here again the services of the banks will be quired and may be relied upon to help those who are dealing ith the situation seriously.

The investments at over £78,000,000 show a reduction of ,000,000 on the year, and they now constitute just over 23 r cent, of our total deposits as against nearly 28 per cent. last . We have continued the policy, which I mentioned in dressing you a year egg, of maintaining the bulk of our invest- erns in short term redeemable stocks—a policy which it is perhaps ecessary to tell you has been amply justified by the march of ents. I think, however, I shoukl repeat my remark of a year

o and say that the pursuit of such a policy has necessarily la- ved a sacrifice of current income.

The recently announced replacement of the 44 per cent. Con- rsion Loan by an issue at 2 per colt., maturing in three to five S, is the first indication of official views on the matter of onkney rates. The 44 per cent, stock has been largely held by s and finance houses for some time past, so that the private stor is not so greatly interested in It as in some of the other(govern- em loans. No doubt these institutions will convert their hold- Fs imo the new 2 per cent, stock, but the fact of such a low being obtainable by the Treasury indicates that when the time Ives hi their opinion for the issue of longer dated stock in order pros dc fresh money for financing the war expenditure, a oder,re rate of interest is to be anticipated. While I am on the topic of war finance, the attractive issues. of National Defence Bonds and National Savings Certificates which were created in November should prov.c especially attractive to those with small sums of money to invest. The response has already been considerable, and I have no doubt that as the year progresses and the financial needs of the country are more fully appreciated, so the applications to these two issues will Increase in volume.

Before I pass to the profit and less statement, there is one other item in the balance-sheet which ordinarily, since it is largely self-liquidating in a matter of days, calls for no comment. I refer to balances with other banks and items in transit. To.a large extent this consists of claims on other institutions paid in by our customers in respect of which we ourselves have not been paid at the time of making up our accounts.

The transfer from London of the major portion of the work connected with the clearance of cheques necessitated the establish- ment of a Central Clearing in the country, and this arrangement results in an extension in the time for collections.

THE NET PROFIT

The profit and loss statement shows a net profit of £5,718,983 —a reduction of some £5o,00o on 1938. Having regard to the exceptional conditions of the past 12 months, which have included heavy expenditure on A.R.P., duplication of certain records, decentralisation and provisions we deemed it desirable to make in view of the uncertainties of the future, I am sure you will all agree that the result is most satisfactory. (Hear, hear.)

The dividend is continued at 55 per cent., being the same rate as in recent years, and in this connexion it should be borne in mind that shareholders have not been asked to bear in respect of the interim dividend declared in July the additional tax of is. 6d. in the pound imposed in the War Budget last October.

We have continued to allocate £500,000 to bank premises and £250,000 to pension fund, leaving to be carried forward £520,659, which reflects the reduction in the annual profits of about £5o,000. - Shareholders will doubtless be anxious to hear how much the war has affected the members of our staff, on whom so much depends. It has been the policy of the general management of the bank, in preparation for an eventuality we prayed might never occur, to encourage our staff to take a full share in the defence organisations of our country. A measure of the success of their efforts is re- vealed in the number of men whose services we lost on the out- break of war.

Apart from the question of staff, the deterioration of the in- ternational political situation many months ago forced upon us the responsibility of devising emergency measures for carrying on the business of the bank in the event of the outbreak of war, and I may say that all the banks have co-operated whole-heartedly in measures designed for mutual assistance in case of need, so that banking services to the public shall suffer the minimum dislocation.

IMPORTANCE OF EXPORT TRADE For some years it has been my custom when addressing you to pass briefly in review the condition of the country's main in- dustries judged in the light of the bank's experience.

Similarly, as we are the greatest international trading nation, it has seemed to me appropriate in past years to remark on the condition of those overseas countries with whom we are most nearly concerned. Here again the present unstable situation would deprive such a survey of all significance. We can say, how- ever, that both the urgency of an -expansion of our export trade and the general benefits to be reaped from it have seldom or never been paralleled in the history of this country. And, it may be added, the spirit of co-operation between the Empire countries, France and ourselves, coupled with a world sentiment unmis- takably hostile to the enemy, render our trading prospects im- measurably more favourable than they were, for example, during the war of 1914-1918. It cannot, however, be repeated too often that the price factor is frequently the determining one when dealing with foreign trade. It is therefore all important that the efforts now being made by the Government to prevent a continuing rise in manufacturing costs and prices should meet with the utmost degree of success. Many factors militate against early spectacular progress in increasing our export trade, notably the war at sea to- gether with the system of controls of both inward and outward cargoes. But we may be absolutely confident that the magnificent work of the Allied Navies and Air Forces will, at no very distant date, achieve such a measure of success as to remove most of the physical risks at present associated with foreign commerce.

' Opinions as to the immediate course of events are almost value- less. It will nevertheless assist us in facing the future if we realise that seen in proper perspective the first few months of the war constitute a period of readjustment of the whole of the nation's economy. That this process is being accomplished with a mini- mum of serious dislocation, reflects great credit on those who many months ago were obliged to formulate plans which in the nature of things it was impossible to try out in practice before a state of emergency arose. Mistakes there have been, and it is well that public opinion has assisted to remedy them. It seems to me, however, that there is the risk of danger in over criticism, for it not only tends to undermine the confidence of those who may be doing their best in difficult circumstances, but also discredits just and necessary criticism.

It remains for those whose duties and responsibilities lie in this country to protect and support the home front to the utmost extent that is possible as the least that can be done for those who are called upon to face the infinitely greater risks and hardships of active service. (Cheers.)

The reports and accounts were unanimously adopted.