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The Pamphlet Collection of Sir Robert Stout: Volume 74

The Bank of New Zealand

The Bank of New Zealand.

He had been asked what it was the Colony had really done for the Bank of New Zealand. He thought he could give them a clear synopsis. In past years the Bank had invested capital in landed estates, and a large part of its capital was thus locked up. A time came when the Bank had not enough to carry on its legitimate banking business, and it tried to raise two millions of additional capital, but failed. Then it came to the Government and said that unless it received that sum it must close. The Government considered the matter, and said it was able to say that two millions would set the Bank on a sound footing, that the Government could guarantee the sum mentioned, and the people would never be called on to pay a penny. The House accepted the assurance, and the guarantee being given, the Bank was able to get the two millions. Next session the Bank again came to the Government, and the matter was referred to a Select Committee of both Houses, and a lengthy report was brought down. The Committee reported what was known by many before, that the Estates Company and the Auckland Agricultural Company were practically one concern with the Bank. In a sense the Bank separated when the Estates Company was formed, but it did not sell, and held £1,850,000 worth of shares, while debts due to the Bank were stated at £1,426,702, making £3,276,702. They had the accounts, but few could give much information. In the balance sheet of the Bank at the 31st March last the assets were placed at £377,000 less than the liabilities. They had, too, the combined balance sheet of the Estates Company and Agricultural Company, showing a deficiency of £1,764,883, and that, with the Bank deficiency of £377,000, made a total of £2,141,00. The important question was, how could they put the concern so that it might carry on, for the Premier had said what was quite true—that vast misery would result from its stoppage. The first proposition was that the whole of the capital' should be wiped off—£900,000; next, that the proceeds of the half-million call on the reserve—£450,000—should be written off. But when that was written off there was still a gap of about £800,000. That was proposed to be dealt page 10 with in another way. It was proposed to establish a Realization Board to take over the estates from the Estates Company, valued at £1,879,000, for which it was to give £2,784,000, or £855,000 more than the book value, and this £855,01 0 was to bridge the gap referred to. That brought the assets and liabilities equal, but in addition the Colony was to give the Bank more capital by taking £500,000 worth of new shares, on which 3½ per cent interest is guaranteed that gave the Bank a clear half-millions carry on with. The collateral security taken was the remainder of the uncalled capital. What was their capital liability then of It was the £2,000,000 guaranteed in 1894, the £2,784,000 given in '95, and the £500,000 for new shares, or a total of £5,234,000 The annual liability for interest was £80 000 a year on the two millions, £95,600 on the debentures for assets realization, and £17,500 on the half million as shares. It had to earn £198,000 a year clear of expenses, or the taxpayers would have to make it up. To save this Bank, and to save a vast amount of misery, he did not think they would get free without losing two millions, and he feared, a good deal more, and he thought if the realzation of assets brought in a million it would do well. The first attempted sale had been a failure. 'I hey had, however, to bear in mind that this matter was forced on the Government, and whether any Government could have faced the position and done better he doubted very much. (Applause.)