The Story of the Balance-Sheets

Deposits Rise ; Loans Fall

IN some respects the main facts expressed in the balance- sheets of the joint stock banks as made up at December 31st last are almost the exact reverse of those revealed in the balance-sheets of a year ago. In the year 1931 there was a good deal in the way of con- traction of credit, especially during the second half of the year, and bankers' deposits showed a material decline. The past year, however, has been one of considerable expansion in credit, and, as a consequence, the Deposits of the group generally known as the Big Five rose by over £200,000,000, while - if some of the country banks are added to the list the rise is about £238,000,000, and if there were to be included the deposits of some other great banking institutions, such as Glyns, the rise would have been even greater. That the rise was well spread over all. the institutions will be gathered from the following table :

DEPOSITS.

Dec. 31st, 1930. Dec. 31st, 1931.

Barclays Bank.. .. 349,273,283 335,565,144 Lloyds Bank .. 364,649,397 333,735,455 Midland Bank .. .. 399,605,549 360,247,498 National Provincial Bk. 292,379,793 261,925,539 Westminster Bank .. 291,579,675 272,405,692 Total 1.;697,487,697 1,563,879,328 1,773,278,043 District Bank .. 52,443,952 50,322,360 Manchester & County Bank 17,745,272 16,148,807 Martins Bank .. 78,562,603 75,927,392 National Bank.. • 36,284,348 36,978,320 Union Bank of- Man- chester .. 17,861,719 15,638,409 19,159,664 Williams Deacon's Bank 32,008,887 29,043,386 33,812,263

Total .. .. 234,906,781 224,058,674 252,979,188 While, however, that part bf the balance-sheets concerned with Deposits 'shows 'expansion, a study of most of the other items • reveals- unmistakable evidence of the difficulties with which banks have been confronted during the year in maintaining their profits, while it also revfals, the extent of the industrial and financial depression throughout the country with the consequent decline in demands for banking accommodation. The first sign of this, however, is not altogether to be obtained from the totals of Cash, and a moment's consideration will show the reason. In consequence of the rise of Deposits, there is, of course, a considerable rise in the Cash' in 'Hand and at the Bank, but, on the whole, the proportion of cash to liabilities is slightly below the level of the previous year. Unfortunately, however, this does not mean that the banks were finding such profitable use for their money as to tempt them to keep somewhat smaller Cash balances, but rather that owing to the difficulty of obtaining an adequate return on the use of their funds it became the more necessary to employ their. resources as fully as possible. Moreover, as will be seen later, the increased holding of high-class securities, including Treasury Bills, gave to the balance- sheets a greater liquidity than has ordinarily been exhibited even when the actual proportion of cash balances may have been a trifle larger.

We now come to the most melancholy part of the • banking story for the past year as revealed in the balanee- Dec. 31st, 1932.

381,846,610 382,142,705 419,282,966 291,822,828 298,182,934 56,829,351 18,231,732 85,814,430 39,131,746

sheets. At the end of 1931 the balance-sheets of the Big Five showed a reduction in Loans and Advances of about £20,000,000, but for the past year the decline in the same group was nearly £120,000,000, while the larger group, including certain of the country banks, as tabulated below, reveals a total decline in Loans and Advances of over £131,000,000 :

LOANS AND ADVANCES.

Barclays Bank., ..

Lloyds Bank .. Midland Bank .. Dec. 31st, 1930.

168,479,837 175,907,909 203,582,971 Dec. 31st, 1931.

170,797,393 167,517,978 197,837,464 Dec. 31st, 1932.

151,042,992 141,196,001 170,230,809 National Provincial Bk. 149,492,770 142,379,043 122,231,862 Westminster Bank .. 131,950,516 131,366,485 105,747,152 Total , 829,414,003 809,698,363 090,448,816 District Bank .. 20,577,119 19,952,328 17,690,457 Manchester & County

Bank 10,200,956 9.604,868 8,931,365 Martins Bank 37,445,477 34,645,837 29,484,644 National Bank.. .. 16,377,128 15,722,683 14,520,190 Union Bank of Man- chester .. 8,832,515 8,000,858 7,491,713 Williams Deacon's Bank 15,590,259 13,880,948 11,395,388 Total .. 109,023,454 101,807,522 89,493,757

Before I note the direction in which bankers employed their increased resources during the past year, one further word must be said with regard to another aspect of the decline in activities._ Acceptances of the Big Five showed a decline for the; year of over £11,000,000, and this shrinkage, moreover, followed a severe decline in the preceding year. In fact, the total Acceptances for 1932 of just over £82,000,000 compare with over £154,000,000 in the balance-sheets for December, 1929. 'or it must be remembered that in the early part of 1929 the boom in the United States was still, in progress and in consequence of the high money rates prevailing in New York there was a general shifting of Acceptance business to London where rates were easier.

What use, then, it may be asked, did the banks make of the great expansion in their resources as expressed in the rise in Deposits ? The answer to the question will be found in the two following, tables : Bus DISCOUN'TED.

Dec. 31st.

1930. Dec. 31st, 1931. Dcc. 31st, 1932.

Barclays Bank.. .. 50,901,977 40,791,393 66,289,257 Lloyds Bank .. .. 53,733,112 42,587,498 76,788,343 Midland Bank .. 83,922,557 57,132,250 86,505,644 National Provincial Bk. 51,081,089 36,689,130 58,928,441 Westminster Bank • • 48,759,717 34,206.192 66,865,805 Total .. • • 288,378,452 211,406,463. 355,377,490 District Bank 6,798,984 3,887,726 7,188,260 Manchester & County

569,314 280,476 250,192 Martins Bank .. 2,667,145 1,963,868 1,133,889 National Bank.. .. 1,891,315 2,336,737 3,849,19' Union Bank of Man- chester .. 429,427 334,889 1,383,416 Williams Deacon's Bank 2,492,730 2,042,323 3,690,730 Total .. 14,838,915 10,846,019 15,495,684

(Continued on page 297.)

INVESTMENTS.

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

st 1930. 1931.

56,087,046 56,564,015 87,351,718 52,640,738 51,327,304 85,359,183

38,671,557 42,190,262 943:=1

38,327,813 32,859,393 60,749,090 50,616,085 51,451,668 72,250,653 Total .. 236;343,849 234,392,642 District Bank .. 16,651,545 18,892,804 Manchester & County Bank .. .. 4,221,266 4,858,326 Martins Bank .. .. 18,677,148 18,815,959 National Bank.. .. 15,375,903 16,438,327 Union Bank of Man.

chester .. 2,299,179 2,756,486 Williams Deacon's Bank 8,306,444 7,408,886 Total .. 65,531,485 68,170,788 88,146,219 I■TOTE.—Theso figures do not include investments in affiliated banks.

From the first of these tables it will be seen that under the heads of Bills Discounted the eleven banks enumerated in the table showed a total increase of about £148,000,000. Not, of course, that these movements represent a rise in the volume of commercial bills, for most of the in- crease is connected with enlarged holdings of British Treasury Bills. During the first half of the year these bills may have been acquired at rates giving something like a reasonable profit to the banks, but during the second half of the year the return in the shape of interest on the bills acquired must frequently have been under 1 per cent. Finally, there will be found a partial explan- ation of the rise in Deposits and also of the other direction in which banks have employed their resources in the great increase which took place in the banks' holdings of Investments. For when the joint stock banks in the aggre- gate increase their holdings of Investments, it means, of course, that they have been purchased from the general public and, as a consequence, the Deposits of the general miblic increase. During last year the eleven banks dealt with in the tables in this article increased their holding's of investments by no less than £184,000,000, while if comparison is made with 1929 the rise in the holdings of Investments by these eleven banks is no less

Barclays Bank.. Lloyds Bank ..

Midland Bank.. .. National Provincial Bk. Westminster Bank 398,775,995 21,805,476 5,858,997 30,429,571 17,026,787 3,271,496 9,753,892