COMPANY MEETING

BARCLAYS BANK LIMITED

THE INTERNATIONAL SITUATION MR. EDWIN FISHER'S SPEECH Tan forty-third ordinary general Meeting of Barclays Bank was held on Thursday, January loth, 1938, at Southern House, Cannon Street, E.C., Mr. Edwin Fisher, the chairman of the Bank, presiding. The Chairman : My Lords, Ladies and Gentlemen —I will call upon the Secretary to read the igotice of Meeting and the Certificate of the Auditors which appears at the foot of the Balance Sheet that has been submitted to you.

The Secretary (Mr. W. N. Seeley) then read the formal Notice convening the Meeting and the Report of Messrs. Kemp, Chatteris, Nichols, Sendell and Co., and Messrs. Price, Waterhouse and Co.

The Chairman : My Lords, Ladies and Gentlemen Is it your pleasure that the Report and Accounts submitted be taken as read ? Before dealing with the ordinary business of the meeting, I would refer to the great loss which we have suffered through the death of The Right Hon. The Earl Peel, P.C., G.C.S.I., G.B.E., whose association with the Bank dates from the time of the amalgamation with the London Provincial and South Western Bank, of which he was a director. By his death, the country has lost a great public servant, and we have been deprived of a colleague whose exceptional qualities and wide experience of affairs were most valuable to us.

I also have to report that The Right Hon. The Viscount Wimborne, P.C., whose retirement from the Board falls due by rotation this year, has intimated that, for reasons of health, he does not wish to seek re-election.

Mr. Charles Henry Dent, another director who retires by rotation, has also decided that, on the ground of advancing years, he will not seek re-clection. He has been associated with the Bank for nearly half a century, and for the last 24 years he has been a valued member of our Board. We desire to place on record our appreciation of his long service. It is with a deep sense of regret that we report the death of our Staff Manager, Mr. Claude Douglas Carruthers. I would also specially refer to the loss which we feel, in common with our Canadian associates, through the death of The Right Hon. Sir Robert Laird Borden, P.C., G.C.M.G., LL.D., K.C., who was President of Barclays Bank (Canada) since its inception in May, 1929. Sir Robert Borden's great experience and wise judgement were of the utmost value to Barclays Bank (Canada), and we counted ourselves fortunate in having associated with us a man of such distinction, character and personal charm.

Before I pass to a review of our business, there is a point relating to the internal organisation of the Bank which should be of interest to shareholders. You are aware that, in order to maintain, as far as possible, that close personal touch between the Bank and its customers, which was characteristic of the private banks from which Barclay and Company Limited was originally formed, we adopted a system of decentralised control of our country branches, through Local Boards. Subsequent amalgainations, which furnished us with branches in other parts of the country, did not in every case provide the means of establishing immediately this method of control, but we have gradually filled the gaps, by the citation of new Local Head Offices, and I am pleased to say4t11at, with the formation, a few weeks ago, of a Local Head Office at Swansea to control the branches in West Wales, our network of Local Districts is now complete. The system is also applied, in a limited degree, to London, where we have three Local Head Offices, representing the old private banking firms of Barclay, Bevan, Tritton and Company, Ransom, Bouverie and Company, and Goslings and Sharpe, in Lombard Street, Pall Mall East, and Fleet Street respectively. This system provides for the administration of all but major matters by Local Directors and District Managers possessing local knowledge and an understanding of the problems of their respective areas, and I am convinced that it is of great value both to the Bank and to its customers. We enjoy the advantage of having members of our Board who are also Local Directors and as such are in daily touch with the affairs of the Bank in one or other of our Local Districts.

TIM ECONOMIC SITUATION.

The twelve months covered by our accounts—a year made memor- able by the Coronation of our King and Queen—have been eventful in many respects. The year has seen industrial production in this country and, the employment of insured workers raised to record high levels; an improvement in the position of the Special Areas, advancing wages and company profits, and rising internal and externai trade. It has not been, however, without its anxieties, which, as the months have passed, may have served to cause some diminution in that confidence which has carried us through five years of recovery. The political-outlook abroad has remained clouded, and the situation has been disturbed by the continuance of civil war in Spain, and by the outbreak of hostilities in the Far East between China and Japan.

In the United States of America, there has been a definite decline in business activity, which, in view of the economic importance of that country, must be taken into account in considering the prospects for world trade. It would appear, however, that the reasons under- lying much of the recession in business on the other side of the Atlantic have been domestic rather than international, and in so far as the remedy lies in the hands of the United States, it is to be hoped that lost confidence will soots be regained, and that private enterprise will be encouraged to exert its influence towards the betterment of trade in that country, which is so important a factor in world prosperity. That trade is good in the United Kingdom at the moment, no one will deny. All the evidence we have goes to show that this is indis- putably the case. But the very existence of this satisfactory state of things causes some people, unwilling to count their blessings, to look with unwholesome persistence for the " slump " which they feel must of necessity be round the corner. We should have a proper sense of values. That bad times follow good is common knowledge, and trade charts, with their peaks and depressions, supply evidence of this : but, as the stage is set today—and it is a different setting from that of 1929—there is little justification for undue concern. We must count ourselves fortunate that we, in this country, have a measure of general prosperity which is by no means universal. But no country can prosper in isolation, and every effort should, therefore, be made to widen the circle of well-being, so that all nations may share in the improvement which scientific and technical developments have made possible. In accepting, with proper appreciation and thankfulness, the condition of affairs at home, we must not be unmindful of the part played by our Government, which, through its administration of our national finances, its trade negotiations, and its contacts with industry, has done much to restore confidence to the trading community : for confidence is the breath of life to business, and its absence produces that state of hesitation and half- heartedness which lowers the general system, and has a paralysing effect on all enterprise.

Whatever the future may hold, we may safely say that on balance we are in a stronger position to meet any changes which may cause fluctuations in the level of prosperity than we were only a few years ago. Taking all the various factors into consideration, therefore, we may regard the year 1937 as one of further progress, and this is reflected in the Accounts which have been submitted to you and to which I now propose to refer in some detail.

CURRENT AND DEPOSIT ACCOUNTS.

The total of our Current, Deposit and Other Accounts, on December 31st last, amounted to the record figure for this Bank of £434,645,323 and showed an increase of about £5 million compared with the figure twelve months earlier. The shareholders will be interested to know that the average of our Deposits for 1937, as shown in our monthly statements, was greater by £12.6 million than for the preceding year. Our monthly figures reveal a marked degree of steadiness, and while the tendency is upward, there is an absence of wide fluctuations—a feature which we consider most satisfactory.

The money deposited with us by our customers consists of the funds left with us on Current Account, which are withdrawable on demand, and of the sums held on Deposit Account, which are placed with us for varying periods. The total is very widely spread, both as to locality and industry. We have about 1,85o,000 accounts, and the increase during the year has been well maintained. It will be seen, therefore, that the average amount held on Current or Deposit Account is in the neighbourhood of £230. On December 31st, about 37 per cent. of the total was held on Deposit Account, and this proportion tends to fluctuate in accordance with variations in the rate of interest paid and the level of business activity in the country. In this ,connexion, it is, perhaps worth recording that, at the end of the year 1932, when trade was still backirarCI, the propor- tion held on Deposit Account was 45 per cent. of the total.

The total of our Cash in Hand and with the Bank' of England, at £54,839,825, is higher by nearly £3 million than at the end of December, 1936, and the ratio of this item to the total of our Current, Deposit and Other Accounts 'stands at 12.61 per cent., compared with 12.08 per cent. a year ago.

Our Money at Call and Short Notice, at £27,068,850, is a little higher than at the end of December, 1936.

Bilis DISCOUNTED.

At the close of 1937, the total of our Bills Discounted shown in our balance sheet was £50,362,681 of which over £25 million were Treasury Bills. The total is rather less than £9 million below the level of a year ago. This movement was in accordance with the trend in evidence during most of the year, both for our own Bank and for the London Clearing Banks as a whole, and it accompanied a reduction in the average allotment of Treasury Bills at the weekly tenders throughout the past year to £43.3 million, against £44.7 million in 1936. Discount rates have shown little change compared with the previous year, the average tender rate at which Treasury Bills were allotted during 1937 having fallen slightly to the low level of IIs. 2d. per cent., against xis. 7d. per cent. for the preceding twelve months.

The proportion of our funds employed in discounting bills rose considerably during the years when the demand for loans and over- drafts was declining, and the reduction which has since taken place -in the item of Bills Discounted reflects a return to more normal conditions. There was evidence last year that the volume of commer- cial bills available for discount had hown some expansion on the previous twelve months, but there is still room for improvement in this direction.

INVESTMENTS.

It will also be recalled that, when the demand for banking Advances was falling off during the depression years, and for some time after recovery had set in, the Banks bought investments and so found employment for the funds released and for the new Deposits Mit were being accumulated. Now that the recovery in trade has brought about a welcome increase in the demand for loans and over-drafts, it would be natural to expect some decrease in their holdings of securities, and the figures for our own Bank show that the funds required to satisfy the larger demands of our customers for accommo- dation have been provided in part by a reduction of our Investmenis which, excluding our holdings in affiliated banks, have fallen to £1o2,423,395, compared with £109,367,473 at the end of 1936.

ADVANCES.

There has been a considerable expansion in our advances during (Continued on page no.) COMPANY MEETING

(Continued from page 109.)

the past twelve nionths, the total on December 3 z st last being

£196,264,896, compared with £179,655,611 at the aid 1936. This rise, which has been well distributed; reflects -the increased trading activity of the country and the higher level of prices. An analysis of our advances, as at the end of November last, shows that the number of customers borrowing from the Bank at that time had increased, compared with the end of November, 1936, from 202,228 to 215,688, and there had been a slight rise in the amount of the average advance, from £854 to £887. It is also notable that the increase in the number of borrowers occurred mainly amongst those having advances not exceeding £ r,000.

Loans to productive industries accounted for no less than 32.2 per cent. of the total outstanding at the end of November, and in only one case, namely, coalmining, was there a reduction, although that industry undoubtedly bad a busier year. Of the increases, particular importance attaches to the rise in the accommodation granted to the heavy industries, the activity in which has been especially pronounced.

The expansion in building activity in recent years, of which evidence can be seen on every side, is important owing to the many other trades dependent upon it, in a- greater or less degree, as suppliers of the materials used in construction. It is this charac- teristic of the industry which has no doubt prompted fears in certain directions as to the effect on the general level of prosperity should a substantial reversal of the trend take place. When we come to examine the position, however, we find notable omissions in the statistics available. For instance, there are no estimates of the cost of plans approved in the London County Council area, while the figures compiled by the Board of Trade for the purpose of the quarterly Index of Production relate to only 3o per cent. of the activity in the building industry, against 90 per cent. for all other groups. Nevertheless, the statistics which are available, while they show some falling off compared with 1936, reflect the high level of construction maintained. For the first eleven months of 1937 the building plans approved by 146..Local Authorities—which, by their nature, indicate at any one time the future rather than the current output—amounted to an estimated cost of £i oo.8

and while this figure did not reach that for the same period of the preceding year, namely £zo8 million, it greatly exceeded the totals of £63 million and £73.1 million for the whole twelve months of each of the years 1931 and 1929 respectively. Moreover, while the Board of Trade Index of Production for building materials and building in the third quarter of last year was slightly lower than in the same period of 1936, it was 61.6 per cent. greater than the quarterly average for 1930. Cheap money has undoubtedly assisted the building trades in recent years and this factor is still operative.

NET Paoriv.

The net profit for the year ended December 31st last, after pay- ment of all charges and after making provision for all bad and doubtful debts and for contingencies, amounted to the sum of £2,133,825 35. ird. and showed an increase of £239,464 3s. 6d. compared with the previous year. The sum of £639,767 13s. 4d. was brought forward from December 31st, 1936, making a total to be dealt with of £2,773,592 17s. 3d. The directors have decided to appropriate a sum of £500' goo as an addition to the published reserve of the Bank, making that fund £10,750 000. In view of the

i continued increase in our business, we feel that this is a prudent step and one which will meet with the approval of the shareholders. A sum of £200,0oo has been applied towards the reduction of Premises Account. Our premises now stand in the balance sheet at £7,381,855, which we regard as a conservative figure. After making these appropriations, the directors recommend the payment of dividends at the same rates as previously, namely, zo per cent. per annum on the " A " shares, and 14 per cent. per annum on the " B " and " C " shares, less income tax, involving a total of £1,562,202 2S. for the year, leaving the sum of £511,390 15s. 3d. to be carried forward.

Year by year the transactions which the Bank carries out on behalf of its customers show steady expansion, and this has been due in large measure to the growth in the facilities which we place at their disposal. There has again been an increase in the entries at the various branches of the Bank passed to accounts of customers. Our turnover for 1937 was £9,78o million, and ShOWS a growth of over £900 million compared with 1935—a two-year period of comparison.

THE INTERNATIONAL SITUATION. '

The experience of our Affiliated Banks operating overseas and of our Foreign Branches in London and the Provinces confirms the indications, apparent in other directions, of the improvement in economic conditions which has been a feature in many parts of the world during 1937. The increase in internal trade in most countries in recent years has overflowed into external markets and; according to calculations 'made by the Economic Intelligence Service of the League of Nations, the volume of world trade has advanced and is only slightly below the level of the year 1929. Satisfactory as this progress may be in some respects, it only tends to show what could be accomplished if a substantial reduction could be made in the . numerous restrictions which still hamper and obstruct international commerce ; we are approaching a time when the raising of the standard of living will depend more and more upon the lessening of these restrictions. This fact was publicly recognised over a year ago, in the Declaration on Monetarj-Policy made by the Govern- 'meats of France, the United States and this country, which empha- sised the necessity for the development- of international trade and for early action to relax progressively the system of quotas and exchange controls, with a view to their abolition. This Declaration and the adjustments which were made in the values of a number of Continental currencies—notably those of France, Switzerland,

Holland and "Italy were followed by action on the part of certain of the countries concerned, in reducing tariffs and relaxing quota

restrictions. In 1937 there have been other instances of the unilateral

reduction of trade barriers, and some countries have also found it possible, in various ways, to lighten the restrictive effect of exchange

' regulations.. • But much remains to be done, and the method, of bilateral igkeement, slow as this must necessarily be, still seems to be the main practicable way of reducing trade barriers between countries. It is to be hoped that the negotiations for an agreement between this country and the United States will be brought to an- early and successful conclusion.

When we come to analyse the reasons underlying many of the restrictions at present in force and the inability , to set in motion those measures which would help to increase the flow of goods. between nations, one is struck by the widespread lack of confidence prevailing. The effect of this lack of confidence can be seen in the endeavours of countries to make themselves as far as possible self- sufficient, in the large hoarding of gold by individuals, and in the absence of any marked revival in foreign lending in the international capital markets. In the past, this country has greatly assisted in the development of the resources of the world by the provision of, long-term capital. In recent years, the new money provided for this purpose by the creditor countries has suffered a drastic reduction —partly as a result of the restrictions imposed, and partly owing -to unsatisfactory world conditions as shown by the defaults that have taken place in respect of existing obligations. In fact, there are indications that the amount of new issues on foreign account in the important lending markets of the world has been less than the redemption, repayment and repatriation of old foreign loans. The benefit of having a large volume of capital invested overseas_ as

reserve in times of emergency has been demonstrated in the past, and it is not always fully appreciated that a very large part of the

imports which we need to maintain the standard of living of the country is paid for by the income received in respect of the savings of British investors. For example, in the year 1936, had we not been in receipt of this income, this country would have had to sell

abroad an additional £195 million of exports, or increase the value of the services rendered to, countries and individuals abroad; or

reduce her purchases from overseas, which would lead to a reduction in the standard of living. To argue that losses in the past have been made in respect of loans from this country for development abroad takes us nowhere, and to refrain. from foreign lending on that score alone would be unreasonable, although it is realised that at the present time the number of creditworthy borrowers in a position to approach the international capital markets for funds is limited.

Care must of necessity be used in the selection of the project to be financed, and the test as to whether or not it will be remunerative should be applied in each case. Owing to the Government's defence programme and the expansion in imports to form the basis of domestic consumption, there has been a large rise in the adverse balance of merchandise trade, and it might well be that a substantial proportion of any money lent abroad should be expended here upon the purchase of British goods.. In 1936 it was estimated that this country had a small net deficit on her international balance of payments, and although during the past year there has no doubt been an expansion in our receipts from invisible " exports, the large increase in the excess of imports of merchandise must tend to reduce our ability to lend abroad. We should, however, aim at least at maintaining our external capital and keep before us the desirability where possible of providing funds for sound development abroad, which in itself would do much to increase world trade.

The disturbance caused to commodity and financial markets in April last when rumours, which were subsequently denied, were circulating as to the possibility of a reduction in the United States buying price for gold, indicates the uncertainty that will always be present until it proves possible to revive an international monetary system. We should therefore not wait indefinitely before taking some steps in a direction which holds such great possibilities for the improvement of world trade. There must be a readiness in creditor and debtor countries alike to see beyond the present and, by an appreciation and understanding of each others' circumstances and difficulties, to do their utmost to resume more normal, international relationships. The international financial machine has been impeded for too long and there is a risk of the brake becoming rusted to the wheel. A resumption of overseas lending, if and when it becomes possible and prudent, would supply a much-needed lubricant and

would bring nearer the goal of stabilisation. Countries which have so ordered their national affairs as to render themselves, at some sacrifice, largely independent of outside help, would come again upon the scene, and would be able to buy the raw material essential for their needs, if they are to increase their exports to the markets of the world. It cannot be too strongly emphasised, however, that the three interlocking measures necessary to a return to more satis- factory world conditions, namely freer trade, a revival of overseas lending and the stabilisation of currencies, depend upon a revival of confidence. Confidence must be based on something tangible. If countries are to pursue more liberal trade policies, they must have confidence in the international political situation. If investors in the creditor countries are to lend, they must have confidence in the ability of the borrowers to meet the charges for interest and redemp- tion of their loans and in their determination to honour their obligations. If an international monetary system is to be restored, each country must ensure that its economic and financial policies are such as to inspire, confidence in its own currency. Unfortunately in recent years action by individual countries has not always been such as to contribute to that confidence without which real progress cannot be made. The effect of the War has been to disturb both material and moral values. If the world position is to be improved, as we should wish to see it improved, every country must be prepared to make its contribution in at least one of these directions.

The report was unanimously adopted.