A Closer Survey

Deposits Decline ; Reduced Profits

ONE of the conspicuous features of the balance-sheets of the joint stock banks was the general, and in the aggregate very substantial, fall in Deposits. To some extent, no doubt, the decline was connected with continued dullness. of trade and, perhaps, also with the continuance of a de- flationary movement, but far and away the most im- portant influence was the great withdrawal of foreign balances during the period of apprehension to which 14 have referred in the preceding article. Moreover, even after our departure from the gold standard, and notwith- standing the consequent shrinkage in the sterling ex- change, France continued to withdraw her balances from all foreign centres, including London. As a consequence it will be seen from the following table that, so far as the Big Five were concerned, there was a total shrinkage in Deposits as compared with the "previous year of no less than 484,000,000, while if Martins' and some of the Provincial institutions are included more than another 110,000,000 would have to be added to the shrinkage. Dow the different banks were affected will be seen from the following tables : Barclays Bank ••

Lloyds Bank ..

Midland Bank.. .. Darosrrs. Dec. 31st, 1929.

337,439,214 351,644,965 379,622,758 Dec. 31st, 1930.

349,273,283 364,649,397 399,605,549 Dec. 31st, 1931.

335,565,144 333,735,455 360,247,498 National Provincial Bk. 271,712,337 292,379,793 261,925,539 Westminster Bank .. 285,160,311 291,579,675 272,405,692 Total .. 1,625,579,585 1,097,487,697 1,563,879,328 District Bank 52,2461,452 52,443,952 50,322,360 Manchester & County

Bank. .. 18,281,581 17,745,272 16,148,807

Martins Bank -

- - 82,620,494 78,562,603 75,927,392 National Bank .. 37,393,114 36,284,348 36,978,320 *Union Bank of Man. cheater 16,798,273 17,861,719 15,638,409 Williams Deacon's Bk. 31,792,588 32,008,887 29,043,386 Total 239,120,502 234,906,781 224,058,674

CASIT AT riAica AND AT THE BANK OF ENGLAND.

Doe. 31st, Dec. 31st, Dec. 31st,

1929. 1930. 1931.

Barclays Bank 51,850,334 52,509,164 47,271,696 Lloyds Bank .. 44,203,998 42,620,487 37,782,992 Midland Bank.. 46,918,243 47,219,369 38,505,989 National Provincial 31,626,941 33,266,049 29,704,901 'Westminster Bunk .. 35,467,196 35,843,864 32,042,806 Total .. .. 210,066,716 211,458,933 185,308,381

District Bank • • -8,063,750

7,849,197 7,108,069 111ancliestor As County

Bank *4,386,989 *4,615,147 *2,804,997 Martins Bank .. 10,332,182 8,870,438 8,716,385 National Bank .. 4,370,015 3,410,661 4,082,742

Union Bank of Man- (beater

*5,514,919 *7,292,869 *3,365,020

Williams Deacon's Bk.

3,883,780 3,786,044 2,976,159 Total .. 36,551,635 35,824,356 31,053,972

*Including Money at call and short notice.

Both as regards the cash in hand and the money at call ; mid short notice there was a decline fully proportionate to the drop in Deposits. Indeed, so far as the cash in hand is concerned, the average proportion shown by the. Big Five was 11.9 per cent., as compared with 12.4 in the previous year, while at the end of 1929- it was 12.9

per cent. -

Making allowance for the depression of trade and the decline in Deposits, the shrinkage in Loans and Advances 'ivas less pronounced than might have been expected. For 1981 the total Loans and Advances of about 1810,000,000 compared with £829,000,000 for the preceding year, while the aggregate of Loans and Advances made by Martins Bank and some of the Provincial institutions was £102,000,000 against E109,000,000 for the preceding year. i More striking n some reSpeets was the big shrinkage under the head of Acceptances and Endorsements, in

which the decline faithfully reflected the depression in international business.

LOANS AND ADVANCES.

Doc. 31st,

.

Barclays Bank .. 172,926,08 Lloyds Bank 191,71253

Midland Bank.. .. 210,374.230 National Provincial Bk. 156,678,357

Westminster Bank .. 147,350,592

Total .. 879,081,920

District Bank .. 24,327,283

Manchester & County Bank .. .. 10,952,898 Martins Bank .. .. 42,246,172

National Bank .. 16,093,008 Union Bank of Man-

chester .. .. 8.926,803

Williams Deacon's Bk. 16,825,826

Total 119,371,990 109,023,454 101,807,522

ACCEPTANCES, ENDORSEMENTS, &C.

Dec. 31st, Dec. 31st,

1929. 1930.

Barclays Bank 21.991,928 Lloyds Bank .. . {t43,022,815

.8.603,470

-1'36,573,554

*5,939,798 12,710,524 Midland Bank.. .. 37,474,366 25,310,103 10,089,723 National Provincial Bk. 15,174,188 17,814,552 Westtnimter Bank 27,599,579 154,466,340 108,438,344 93,944,867 2,400,469 1,071,945 1,796,045 499,102 139,426 70,019 7,184,101 5,599,786 4,750,673 34,609 25,674 23,813

633,788 518,050 433,585

1,023,094 736,522 449,321 Total 11,775,283 8,091,403 7,523.457 t Endorsements, guarantees and other obligations. * Acceptances.

Even more striking than the reduction in the total of Acceptances was the great falling off under the head of Bills Discounted, and it is under that head we find the principal counterpart to the big reduction in Deposits. As compared with the previous year, the decline in the total volume of Bills Discounted by the eleven banks amounted to no less than £81,000,000. Depressed trade, both local and international, played a part, of course, in producing this great shrinkage under the head of Discounts, but the somewhat smaller volume of Treasury Bills was also responsible. During the earlier part of the year the banks raided considerably to their holdings of investments, but there was some reduction later, in spite of which, however, the available balance for distribution at the end of the year was considerably affected by the depreciation which occurred in British Funds and kindred stocks during the closing month of the year. With regard to this depre- ciation, however, the banks adopted the wise policy of :boldly taking sums from the visible reserves rather than that of reducing their inner reserves. One and all of the banking institutions made ample provision for deprecia- tion in securities as well as for all bad and doubtful debts, and in view of the great recovery which has taken place in all investment stocks since the turn of the year it will be seen that to-day the financial strength and liquidity of the banks has been still further increased in consequence. In the tables on page 329 will be found the total of Bills Discounted and the holding of Investments.

LOWElt DIVIDENDS.

With the exception of Barclays, all the leading banking institutions reduced their dividend distributions for the year, and, without exception, they showed a reduction in profits. Indeed, the decline in net profit is even mom striking when it is compared with a few years ago. Thus,

Dec. 31st,

Dee. 31st, 1930. 1931.

£

168,479,837 170.797,393 175,907,909 167,517,978

203,582,971 197,637,464 149,492,770 112.379.043

131,950,516 131,366,485 829,414,003

800,693,363

20,577,119 19,952,328 10,200,956 9.604,808

37,445,477 34,645,837 16,377,128 15,722,683

.

8,832.515

8,000,858 15,590,259 13,880.948

Doe. 31st, 1931.

10,796,794 *2,695,520 -1-33,439,357 19,222,279 9,229,529 18,561,388

Total District Bank Manchester & County Rank Martins Bank,, National Bank

Union Bank of Man- chester

Williams Deacon's Bk.

for example, in the case of Barclays Bank, where the reduction in net profit for the year was only about 126,000, the decline as compared with 199 was more like £330;000. Similarly,- the net profit of- Lloyds of 11,927,000 compared with £2,130,000 for 1930, but with 12,542,000 for 1929. Again, in the case of the Midland Bank, last year's profit was £2,057,000, against £2,319,000 for 1930, but for 1929 the profit was £2,665,000. In the ease of the National Provincial Bank the reduction in net profit Was a little undec; £200,000, but compared with 1929 there was a reduction of about £440,000. And, finally, in the case of the Westminster the decline in profit for the year was about £220,000, but compared with 1929 the drop was about £560,000. Throughout

BILLS DISCOUNTED.

flee. 31st, Dee. 31st, Dec. 31851

1929. .. 1931.

E

: Barclays Bank 36,966,668 50,901,977 40,791,393 Lloyds Bank .. 39,625,276 53,733,112 42,587,498 i Midland Bank.. .. 58,783,657 83,922,557 57,132,250 :National Provincial Bk, '28,190,610 51,061,089 36,689,130 Westminster Bank .. 32,501,317 48,759,717 34,206,192 Total .. 196,067,528 288,378,452 211,406,463 : District Bank 5,029,779 6,798,984 3,887,726 • Manchester it County

Bank 570,558 559,314 280,476 • Martins Bank .. 3,862,087 2,667,145 1,963,868 • National Bank 2,311,260 1,891,315 2,336,737 Union Bank of Man- chester .. 469,465 429,427 334,889 Williams Deacon's Bk. 2,374,072 2,492,730 2,042,323 Total .. 14,617,221 14,838,915 10,846,019

LvvfisratElers.

Dec. 31st, Dee. 31st, Dee. 31st,

NOTE—These figures do not include investments in affiliated banks.

the period of much higher profits the banks, however, very wisely made no increase in their dividends, and this enabled them right up to the close of 1930 to maintain these dividends, with ample provision for bad debts and all other contingencies.

THE OUTLOOK.

It is significant of the closeness with which banking *results are followed that the general effect of the half- yearly Reports—notwithstanding the reduction in profits and in dividends—upon the public and upon bank -Shareholders alike was reassuring. It was recognized, in fact, that 1931 marked a year of wholly abnormal - conditions of depreciation and difficulty, and it was felt that the manlier in which the banks had stood the strain contrasted marvellously with the conditions which had been experienced abroad. Bank shares fell for a time when the lower dividends were announced, but there was ; -a considerable recovery later, helped, no doubt, to some ;extent, by the great appreciation in British Funds, which! showed that the necessity for withdrawals from banking rreserves p3 cover the depreciation had disappeared. I should doubt very much, however, whether the recovery in bank shares was based upon any confident; '.expectations of an early return to the level from which dividends have recently been reduced. There is a very clear recognition by the public as well as by the banks not only of the obscurity of the outlook, but of the many: factors—inoluding, of course, the situation in Germany—' i which might easily have a disturbing effect upon the Ilinancial situation for some little time to come, Above

1929. E 1930. E 1931. E Barclays Bank 52,736,790 56,087,646 56,564,015 Lloyds Bank 37,134,127 52,640,738 51,327,304 ,Midland Bank.. .. 32,928,890 38,671,557

42,190,262

NatiOrial Provincial Bk. 35,823,629 38,327,813 32,859,393 Westminster Bank .. 37,923,453 50,616,095 51,451,668 Total .. 196,546,889 236,343,849 234,392,642 District Bank 14,826,830 16,651,545 18,892,804

Manchester 83 County

Bank 4,221,639 4,221,266 4,858,320 Martins Bank .. 17,807,868 18,677,148 18,815,959.

National Bank .. 14,556,259 15,375,903 15,438,327 Union Bank of Man- chester .. 2,877,592 2,299,179 2,756,486 Williams Deacon's 13k. 6,017,161 8,306,444 7,408,8811 Total 60,307,349 65,531,485 68.170,788

all else it is recognized-that until there has been a recovery in prices of commodities, and until something has been done to relieve the disequilibrium not merely of gold distribution, but of the trade balances, and the inter- national credit situation as affected by War Debts and Reparation Payments, there can le no return to sound financial conditions. But while the bankers are still confronted with many difficult problems they have the knowledge of public confidence 'and, it may be hoped, less to fear in the shape of unhelpful domestic legislation.

A. W. K.-