192 



Review of Beviews, Vi/13. 



FINANCIAL AND BUSINESS QUARTER. 



CONDUCTED BY ALEX. JOBSOX. AJ.A. 



THE UNION BANK OF AUSTRALIA LIMITED. 



The decrease of i^ 13,000 which the 

 net profits of iJ'i 55,581 shown in this 

 bank's August, 191 2, half-yearly report 

 recently to hand does not seem at first 

 sight particularly satisfactory. But 

 when one remembers that the directors' 

 policy in disclosing profits is decidedly 

 arbitrary, and governed by the desired 

 appropriations, this decline appears of 

 little consequence. Especially so, seeing 

 that the half-year, though earning less 

 than the February, 191 2. period, made 

 over ;^20,000 more than did the preced- 

 ing August. The chairman, too, said 

 that the report was " highly satisfac- 

 tory," which further minimises the im- 

 portance of the fall. 



* * * 



The arbitrary nature of this profit is 

 evident from the fact that after adding 

 iJ"50,ooo to the reserve fund, making it 

 iJ"i, 450,000, and using £"105,000 to pay 

 the customary 14 per cent. p. a. half- 

 yearly dividend, there remained but 

 £582 to carry forward in the profit and 

 loss account, raising it to £43,349. 



* * * 



Though this bank has of late been 

 chary of its advances, the August, 191 2, 

 figures (£16,300,000) are only £150,000 

 below those of August, 191 1, probably 

 because the policy of restricting ad- 

 vances was not then so strictly carried 

 out as it has been in the past six months. 

 The deposits, however, were clearly 

 affected by the dear money market, for 

 they fell away by £650,000, thus being 

 chief!}' responsible for the full }'ear's 

 decline of nearly £700,000 in the public 

 liabilities to £23,872,000. The chairman 

 attributed this to Australians finding 

 openings through the tight money mar- 

 ket for their uninvested funds. But a 

 more probable reason seems to be that 

 the public generally has been drawing 

 out its funds to meet heavy increases in 

 expenditure. 



The liquid assets were necessarily 

 affected by this drain, and their total 

 was accordingly reduced b}' £447,000 to 

 £10,158,000. The influence of this de- 

 crease on their ratio to public liabilities 

 was not, however, adverse, for the 

 liabilities having declined, the propor- 

 tion rose in the year from 42.6 per 

 cent, to 43.1 per cent., which is quite a 

 satisfactory one. 



* * * 



The decrease in the liabilities combined 

 with the growth in the reserves has im- 

 proved the margin of assets to liabili- 

 ties. In August, 191 1, there were 

 £111 17s. of assets per £100 of public 

 liabilities, whereas in August last the 

 proportion was £112 los. This is still 

 much below the ratio of over £115 

 shown by two other leading Australian 

 banks. It may be that this has in a 

 measure influenced the directors in their 

 decision to ask the shareholders to give 

 them power to issue 20,000 new shares 

 whenever they deem expedient. The 

 reason given, however, is that the pro- 

 gress and prospects in Australia and 

 New Zealand are such as to warrant 

 such a step. Whatever be the actual 

 reason there can be no doubt that the 

 move is a good one, both as regards 

 security and also the possibility of more 

 profits. 



The bank's surplus assets now ap- 

 proach £3,000,000, securing the paid- 

 up capital of £1,500,000 (60,000 shares 

 paid to £25, with a reserve liability of 

 £50), the reserve fund of £1,450,000, and 

 the profit and loss balance of £43,349. 

 This is excellent from the shareholders' 

 viewpoint, for these assets represent 

 over £49 17s. 9d. per share, and after 

 allowing £25 for the existing paid-up 

 value there remains nearly £25 more in 

 disclosed reserves to be set against the 

 reserve liabilitv of £so on the shares. 



