FINANCE PUBLIC AND PRIVATE

BANKING AND INSURANCE SHARES AS INVESTMENTS By ARTHUR W. KIDDY.

THANKS in part to the growing familiarity of the public with the general conduct of banking and insurance business, and the steadiness with which profits are main- tained and prudently handled, and thanks also, perhaps, to some extent to the manner in which liability on the shales of some of the banks has been-reduced, there is little doubt that the number of holders of banking and insurance shares has greatly increased in recent years. Time was when, by reason of the heavy uncalled capital, and the large denomination of banking shares, they were for the most part held by few and wealthy people and often (as now also) by important customers of the banks. Those were the days, moreover, when quite an unnecessary veil-of secrecy obscured the general operations of banking. The annual or half-yearly meetings of our banks some thirty or forty years ago were generally attended by a mere handful of shareholders ; the proceedings .lasted a few minutes and the chairman's remarks were virtually confined to the submission of the Report and Balance- sheet. Nor in those days did the man in the street and the small investor get very much enlightenment from the daily newspapers. Not only were the Money Articles of those times scanty affairs as compared with to-day, but for the most part they were written in a language unintelligible to the ordinary person. Apparently it was not thought worth while to describe either banking or any other financial operations in terms intelligible to those unversed in the intricacies of fmance.

We live, however, in a very different world to-day. Modern journalists and financial writers have succeeded in so writing upon such matters as banking, the Stock Exchange and the foreign exchanges as to make fairly intelligible to the whole community at least the general principles and theories of finance, while there are probably now no more largely attended meetings of shareholders than those held by the great joint stock banks, where the chairmen are at pains to enlighten their hearers, not merely as to the Report and Balance-sheet of their par- ticular bank, but as to the significance of the figures revealed and also as to the intimate connexion between them and the economic position of the country. - Nor, probably, has it been without method and intent that some of our banks and insurance companies have split their shares into smaller denominations, and have either reduced uncalled liabilities or have issued new El shares with a fixed maximum dividend. We can easily see that if some big industrial store, for example, increases the number of its shareholders, it also increases the number of its potential customers. It is much the same with the banks and the registers of those institutions to-day must show an expansion in the number of individual shareholders quite out of proportion to the actual growth of capital. It is true, of course, that there is still a considerable amount of liability for uncalled capital upon many banking and insurance shares, and in some quarters exception has sometimes been taken- to the fact that the value of..this asset has depreciated by ..the more varied type of Shareholder. It seems-More probable, however, that the being 'Spreild'iiVer MuCh-wider area the ' vahie-o-iye asset has act4l1Y-incireaied.

tFree of Income Tax.

1The prices and yields on these Scottish bank shares differslightly from those givenin the article elsewhere by a Scottish correspondent, which was prepared a week or so earlier than the foregoing table.

Shares.

Last Year's Dividend per cent.

5414.. 4611..

20: ..

801 .. 161t..

• • 30 • .

• . 70 ..

70

42 so..

.. 60 .. 85

60 • •

80: 25 . • 65 • • 50 ..

• • 50 ..

• • 5: .. 851 ..

- Present Approximate Price. Yield.

s. d. 151 .. 5 4 0 181 .. 13 11 3 *241 .. 12 17 9 81 17 1 3 41 14 14 0 36 12 15 6

*81. 4 11 0

81 .. 4 6 3 *22 3 3 9 *11 4'15 6

*74 • • 6 18 0 p234 .. 3 3 9 *151 .. 5 9 9

*121 .. 4 14 0

231 .. $3 8 0 4174 .. 3 9 0 334 .. 3 17' 6

111 .. 4 9 0 221 .. 4 9 0 43 .. :2 18 0

1i-.. 2 0

*101 .. 14 1 0 Nominal Paid- value. up. £ £ s.

Alliance Assurance 20 2 4

Atlas Assurance 10 1 4 Commercial Union 21 1 10 Eagle, Star and British Domi- nions .. .. 3 3 0 Employers' .. 1 0 5 Equity and Law

Life 100 6 0 General Accident,

Fire and Life .. 5 1 5 Guardian Assur- ance .. .. 3 0 10 London and Lancashire .. 5 1 0 London Assurance 24 1 .- 5 Motor Union .. 1 1 0 North British and Mercantile 5 1 5 Northern Assur- ance .. .. 10 1 0 Phoenix Assurance 10 1 0 PrUdential Assur- ance t" A". 1 1 0 Royal Exchange 100 100 0 Royal Insurance . . 5 2 0 Scottish Union and National " A " 20 1 0 Sun Insurance Office .. .. 10 2 0 Sun life Assurance 10 10 0 World Auxiliary.. 1 0 10 Yorkshire Insur- ance5 0 10

*Ex-Dividend: -

tQuotation per pf Si.ock. :Free of Iiicome.Tax.:

■ •••••••••••

HOweVer that ..may be„there is little doubt .'as to the growing:popularity of bariking'and insurance shares, and in addition to what has already been said a further cause is undonbtedly to be found in the confidence which has been begotten of many years' sound management, so that

Shares.

r =Last Year's

Nominal Paid- Dividend Value. up. Per cent. £ Barclais Bank " B " 1 1 14 Lloyds Bank 7 - .. 5.. 1 164 Midland- Flank .. 12 21 18 National Provincial Bank 90 4 16 Westminster Bank.. 20 5 20

WilliamsDeacons

Bank " A " .. 5 1 134 Bank of Liverpool and MiVrtins .. 20 21 .. 16 District Bank .. 15 3 .. 184 Lancashire - and Yorkshire Bank .. 20 10 .. 20 Alexanders Discount 10 5 .. 211 National Discount " B " 71 21 .. 23 Union Discount .. 10 5 . 211 .. Bank of Scotland ..150 100 .. 16 .. British Linen Bank 100 100 .. 16 .. Commercial Bank of Scotland " A " .. 20 5 16 .. Royal Bank of Scot- land .. ..100 100 141 Union Bank of Scot- land 5 1 • • 18 Anglo-South Ameri- can Bank.. .. 10 5 10 Bank of Australasia 5 5 13t Bank of London and South America .. 5 5 .. 10 .. Bank of New Zealand 1 1 .. 131 .. Chartered Bank of India.. 5 5 .. 201f.. Standard Bank of South Africa 20 5 .. 14 .. *Ex dividend. Present Approximate

Price. Yield.'

£ £ s. d. 24 5 1 9

31 5 6 9

84 5 2 9

1111.. • 5 3 181 .. 5 6 9

2-k .. 5 12 9 7 .. 5 14 3

104 .. 5 8 9 371 .. 5 6 9 161 .. 6 8 3 6 7 9

174 .. 6 1 0

*344 14 13 0 320 .. 5 0 0 154 .. 15 3 3 305 .. 14 15 0 4j-.. 14 8 6 *71 .. 6 18 0 134 .. -1-4 14 6 10 .. 5 0 0 21 .. 4 17 0 194 t5 2 6 111 .. 6 4 6

it may be said that stability in dividends with a slight upward trend as regards profits has, with the exception of certain difficult periods, characterized our banking and insurance companies for very many years. I think, too, that at the present time the confidence of the investor in banking and insurance shares has been further strengthened by a recognition of the successful manner in which these concerns have emerged from a period of exceptional strain. Without particularizing, it may be said that during the past twelve Years banking and insurance companies have passed through almost every possible kind of experience, from which they have emerged successfully and with enhanced credit. And the public which is a fair and on the whole a pretty Competent judge attributes_ the fact first to both our banking and insurance systems having been thoroughly sound, and second to the fact that throughout these abnormal experiences not only a sound but a cautious policy has been pursued. _ In the tables given above present quotations are given of a number of representative banking and insurance concerns together with the approximate yield (based on the dividend for the past financial year) to the investors at current prices. For the most part the tables speak for themselves, but a few general observations upon them may perhaps be useful.

In the case both of the banking and insurance shares it may be said that while present prices are not in most instances at the highest recorded they are generally well above the average over a number of years, though, of course, there are exceptions. Then, in the case of the banking table it will be seen that some of the shares with big liabilities tend to drag behind those where the un- called capital is small. For the most part, however, the yields on the shares of the various leading banks, tend to approximate pretty closely, as also do the yields on the shares of the discount companies, though in the latter case the more varying character of the dividends (although the tendency is upwards) acts somewhat on the general price level. The popularity of Scotch bank shares with investors north (and possibly south also) of the Tweed is indicated very clearly in current prices.

Both in insurance and in banking shares the tendency in prices has been upwards of late, and so far as'the banks are concerned there are no signs of a change. By reason of the prolonged trade depression considerable provision will doubtless have to be made at the end of the year for bad or doubtful debts. On the other hand it will have been a fairly good year as regards the course of invest- ments, many of which have been realized at considerable profit. Moreover, there are not wanting signs of a gradual improvement in trade, while assuming that dividends in future years are maintained, there is the prospect of appreciation in relation to the upward tendency in securities as a whole.

• ,