CO)IPANY MEETING

WESTMINSTER BANK, LTD.

DIVIDEND MAINTAINED ADVANTAGES OF OUR BANKING SYSTEM OPPORTUNITIES FOR INCREASED EXPORT TRADE HON. RUPERT E. BECKETT'S ADDRESS

nit annual ordinary general meeting of Westminster Bank, Limited, was held on January 31st at the head office, Loth- bury, E.C.

The Hon. Rupert E. Beckett (chairman), in the course of his speech, said : It is not my intention today to take up your time in reviewing the state of trade and industry during the past year. It is therefore to our domestic history during the past year that I shall chiefly confine my remarks. I regret to have to report that since we last met we have lost by death two of our directors, Lord Inchcape and Mr. Arthur Asquith. You will doubtless be aware that Lord Runchnan has rejoined our board, and we one and all welcome his return.

Turning now to our balance-sheet, the total of our current and deposit accounts shows an increase on 1938 of some £20 millions. But it was not until war expenditure began to make itself felt in the last few months that our figures disclosed a material increase, and the monthly average of these accounts during 1939 was actually some £7 millions less than that of the previous year. The late increase in deposits was carried in the items "money at call and short notice," "bills discounted," and "advances to customers," which together rose by nearly £25 millions, whilst our investments were lower by nearly a millions. It will thus be seen that the changes have made for increased liquidity of our assets. This matter of liquidity is always of great concern to bankers, and it is worthy of note that on the outbreak of the present war, there was no necessity to introduce a moratorium, with its attendant difficulties.

MERITS OF BANKING SYSTEM I think it appropriate here to say a word on other merits of the banking system of this country, especially when so much is said and written to its detriment. It is frequently implied, for instance, that the banks have an unlimited power to extend credit, but actually their lending power is limited by their accustomed ratio of advances to deposits, and the volume of deposits is itself governed by the Bank of England, acting on behalf of the State. Apart from this fundamental control, the banks have considerable freedom, which clearly they have not abused, or the British bank- * system would not stand so high in world-wide repute as it does today.

This freedom gives considerable national advantages, which a purely state-run institution would not confer. We have evidence in Germany of how complete government control of the financial machinery of the country provides a loophole for the diversion of funds into its own selected channels, with complete disregard for the normal demands for capital by industry, commerce, and private individuals. In any country where finance is so controlled, the temptation for the government to exercise its powers with the cardinal view of maintaining and reinforcing party ends must be ever present and extremely dangerous. Under private enterprise, bankers are left free to satisfy the financial requirements of the community as between themselves and their customers and not as etween the State and users of banking services.

The soundness and intrinsic merits of any transaction are the verriding considerations, and discrimination to further the ends of political party is in British banking quite unknown. Again, anking risks which have been turned " sour " by the onset of war r by other major disturbance, are borne by the banks alone, and o not become a charge on the public purse. But perhaps the owning argument of all is that the deposits of the banks' custo- ers remain their property, not liable to be swept into the State MSC by the fiat of a dictator.

BANK AND DEPOSIT RATES

Apart from the slight reduction in the average volume of our eposits last year, there were other factors which influenced the arning power of our assets, usually to our disadvantage. Bank ate, which had remained unchanged at 2 per cent. since June, 932, was last year raised to 4 per cent, on August 24th, lowered 3 Per cent. on September 28th, and brought back again to 2 er cent. on October 26th, so that for about two months it tailed igher than in the previous years. Increased rates for deposits at nee came into force, but on the other hand, it was only m a few ses that banks were able to raise in due proportion their charges

for advances. Moreover, the higher rates did not persist long enough for much benefit to accrue from our bill holdings.

One frequently hears it said that banks continue to flourish whatever the good or ill fortune of the rest of the trading com- munity. It is truer to say that while the banks, building on solid foundations through many decades have fortified themselves against adverse conditions, they have certainly not been immune from the impact of changing events, as reflected in their profit figures. Our profits have varied over a period of years in accord with the vicissitudes of the economic fortunes of our country, and I have no reason to doubt that what is true of our own institution is equally true of the banking community as a whole.

THE YEAR'S PROFIT The profit figure of £1,475,744 for 1939 was arrived at after providing for rebate and taxation and after appropriations to con- tingency accounts, out of which full provision for bad and doubt- ful debts had been made. Exceptional expenditure on war-time measures both of a capital and of a revenue nature has had to be met. It is no less gratifying to the directors than to the shareholders that, out of earnings during such a difficult year as last, we have been able to maintain our dividends at the rates which have prevailed during the past few years.

It is, I know, not usually possible for banks, or for any other commercial enterprises, to be able to see far ahead, but on this occasion certain expectations so far as banking is concerned seem well founded Unless there is a sudden end to hostilities, which, much as we should desire it, seems unlikely, Government expen- diture on an unprecedented scale for the prosecution of the war must go on. This means a continuous outflow of funds, largely, though not wholly, reaching the pockets of the wage-earning classes. If success attends the Government's appeal for strict economy and the ploughing back of additional resources into savings for defence purposes, a considerable proportion of these extra funds will be absorbed in this way, but there is every like- lihood that a residue of them will accrue as bank deposits. The rate of increase of bank deposits, however, should be very much more restrained than in the last war ; with the Government firmly in control of finance, avenues of investment, and prices, no such rapid rate of rise in deposit!: will again be witnessed.

EXPORT OPPORTUNITIES Greater opportunities for the employment of funds also appear to be in prospect, not only as the result of the speeding-up of the war-time machinery, but also as the outcome of increased overseas trade. From a great part of the Western world, Germany has been virtually ruled out as a trader, through the vigilance of our Navy. This means the removal of a formidable competitor, especially as the exports of ourselves and Germany, both highly industrialised countries, are similar in character. But this is not all. Other European countries also find their exports jeopardised by Germany's methods on the high seas, and some curtailment has naturally followed. Countries contiguous to Germany, and large customers of hers mainly for that reason, find German pressure to trade with her often against their own national interests and political inclinations, and trade conducted in sterling has obvious advantages over barter transactions.

Many South American countries, too, formerly large customers of Germany, now find that market for both imports and exports closed to them, and must look elsewhere for trade development ; their sympathies frequently incline them to turn to Britain to fill the gap. All these factors, then, combine to open up favourab`e avenues for our trade which in normal circumstances would never have presented themselves on so great a scale. But important neutral countries which are not preoccupied as we are with provision for actual warfare, are also well aware of these oppor- tunities, and have more time and attention to give to their exploitation. We shall need all our foresight, energy, and resource- fulness to win further trade through these outlets, but I have high hopes that we shall succeed as is indeed essential when we are bound to import on an abnormal scale. Relating this development to the banking sphere, it should mean a greater employment of our funds in advances to finance these operations.

It would appear that increased deposits are in prospect, and that avenues for their employment will not be lacking. On the other hand, provision against the risks of war will have to be made. I do not therefore look for any appreciable rise in our profits in the immediate future.

In the wider and even more important sphere of our national finances, provided our resources are preserved from waste, and the maximum savings of the community are made available for the national effort, we can hold complete confidence. Whatever the cost, we shall see this thing through. Braced with the know- ledge of ever-growing strength on land, at sea, and in the air, we are certain that finance—the sinews of war—will fully perform its appointed tasks. We are fortified, too, by the knowledge that standing with us is our French ally, a nation reborn in the face of danger, and equally determined to attain our common objective. It is no sreall help to us to enjoy, as we do, the sympathies and confidence in our cause of all unbiased neutral opinion. Above all, we have never entered into any conflict with a more altruist:c aim, and its rightness is unquestionable, despite the bitter dis- paragement and contempt with which our enemies try to besmirch it. Let us, then, go forward, stoically but cheerfully, prepared to meet any eventuality that may befall, in the sure and certain hope that our aims will be achieved.

The report and accounts were adopted.