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Leader (1850-1860), 19th February 1859, Edition 1 of 2, Page 249

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      lip less than 753 , 275 / ., while the paid-up capital is 3 972 ^ 660 / ., making together a sum of 4 , 725 , 935 / belong ing to the shareholders . These vast sums subscribed and gained , give , hoAvever , only a faint notion of the business carried on by these banks . On the secm-ity offered by their capital , and the continued prudence by which their affairs , have been managed , the public entrusts them with money on current accounts , and in deposit , to the amount , at the end of December , of 39 , 583 , 233 / . This is

      16 , 873 , 586 / . more than the deposits , not distinguished from the accounts current entrusted to the keeping of the Bank of England which , at the . same period , amounted to only 22 , 709 , 647 / ., though then swollen by all the public money , which in a few days was to be disbursed to pay tlie dividends on the National Debt . The capital of the Bank of England , and its reserved fund amounting only to 17 , 668 , 077 / ., the money entrusted to the joint-stock banks is only 794 , 491 / . less than the sum entrusted to the Bank of

      England and its whole capital together . In less than twenty-five years the abolition of one trifling and and almost meaningless restriction , to which no person for many years paid any attention , has permitted the development of a branch of industry more serviceable to the public , tested by the use they make of it , than the Bank of England ; and , judging by the average . dividends , almost twice as advantageous to the 6 , 471 proprietors as shares would be in the stock of this renowned corporation . So far as banking capital leads to the

      develop nient of commerce these banks are now of nearly twice as much service to trade as that renowned Bank . That many circumstances have combined to produce this extraordinary result , such as the invention of railways and the great progress of society since 1834 , is unquestioned ; but such improvements and such inventions are always taking place ; and always there are in existence—though a few inquirers only are acquainted with some of then>—numerous restrictions , which everywhere prevent-r—as the old

      monopoly of the Bank of England prevented—the development of new , useful , and profitable branches of industry . Mail ' s knowledge , too , of society is so imperfect that he can never learn how much injury such restrictions cause till after they are abolished and the new industry they prevent has become a living fact . We can , therefore , have no other guide to legislation on such matters than the general principles of freedom ; and every restriction , consetivicntly , shoiild be opposed as certain to do harm , though we may not know in what manner and in what form the harm will come .

      Having on general principles paid thus much , let us now turn to the tables we have compiled , which show us the condition of each bank ; , now and at the end of Juno , 1858 , and the condition , for comparison , of such of these banks as wore in existence at Midsummer , 1855 . First , we see that since 1855 the capital of the five banks then established has only been increased by 33 , 667 / ., while their reserved fund has been augmented from 582 , 728 / . to 702 , 871 / , They huve all , therefore , been enabled to lay something by out of their gains .. Our tobies will show the reader the sums appropriated by each bank to tho reserve , which

      makes it needless for us to dwell here on the proportions . It will bo seen , however , that tho net profits of these banks wore considerably less —58 , 174 / . —in tho half-year ended with December tost , nnrt less in the half-year ended with Juno last , than they were in tho year ended with Juno , 1855 . Th oy were , however , a small sum grcator in the half ' -yonr ended with December than ended with June—flicts which show that tho joint-stock banks suflbri'd to some extent from the commercial convulHioa of 1847 , but that the sufiorjng ' waa groatpr in the early part of the year than in the latter . It may bo noticed that lit both purioil * the largest

      ratio of net profits per cent , to paid-up capital was found as the rule , though there is a -slight' exception in the case of the Union in the last half-year , in conjunction with the largest ratio of deposits and current accounts to paid-up capital . In other words , as the sum of money en trusted , to the banks in proportion to their-own-capital was largo , so was the amount of their net profits and the ratio of these to paid-up capital . This leads us at once to the source of the profits obtained by these banks . Confidence is not , as Mr . Gilbart says , money , but

      it is the means , if honestly and properly used , of making money . The vast stun , then , which the public places in the hands of these banks , enables them—actuated as they always are by similar motives and , therefore , as the rule , pursuing one line of conduct- —to obtain a command over the markets of public securities far greater than is 'acquired by individuals . They are thus enabled to deal with such subjects on more advantageous terms than individuals , and to make a large profit on the ao-CTreo-ate sums entrusted to their keeping , which

      the individuals to whom they belong could-never make , each by his own means , even if each one could turn his money to any . account at all . . shareholders , then , obtain large dividends , and the depositors obtain a considerable interest by the sums placed in any bank being large in amount and skilfully handled . This principle is equally true of private bankers . They make large fortunes when they obtain confidence and behave well ; and we have no doubt were their ledgers exhibited to public inspection we should find in many of them proofs that such men as Lord Overstone , and . other bankers , had made far greater , profits per cent .,

      in proportion to their capital , than ever were made by any joint-stock banks , large as some of their profits have been . Indeed , it is known from many instances , that men who have deservedly ; acquired the confidence of their fellows have made fortunes , as bankers , without possessing any capital . One , then , of the great benefits of joint-stock banks , properly managed , is to diffuse amongst a great body of shareholders the vast advantages which accrue to individuals from enjoying the public confidence . " With this , is combined a very considerable advantage—an exposition of their affairs , which at once tends to make them deserve the

      public confidence , informs the public of the great advantages of credit , and reveals to it the chief mystery of the art by which so many individuals have made large fortunes . It is for us rather a pleasant feature of the joint stock banks that the number of proprietors is increasing . By referring to the table it will be scon thnt , since 1855 , the number in every one of the banks of which we have given a description in that year , had increased in 1858 , and the average capital apportionable to each propi'ictor had decreased . To take the first and last of the series in 1855 the

      number of proprietors was 1 , 220 of the London and Westminster , and 314 of the Commercial ; and the apportionable capital for each shareholder was then 819-67 / . of tho former , and 955-41 / . of tho latter . In 1858 , however , the figures wore—number of proprietors of the London and Westminster , 1 , 648 ; of the Commercial , 375 : npportionnble capitalformer ,-J 0 O 6 80 / . ; latter , 800 ' 00 / . The number of proprietors then is continually increasing , and the proportionable capital of each one decreasing . Such u fact recommends those banks to publio approbation . Thoy diffuse their advantages' .

      Referring more particularly to the instructive tablet * , which have been compiled with groat oaro , with a view to notice the progress of tho banks in the last six months , it will bo seen that tho current acoounts and deposits of tho London and Westminster doolinod in tho half-year from 12 , 443 , 746 / . to 11 , 465 , 815 / ,, or 977 , 931 / . ; tho ratio of net profits to capital accordingly fell off from 9 * 39 por cent to 8 * 63 , but the ratio of dividends * to puid-up capital

      increased from 8-00 to 9-00 per cent . The last halfyear , therefore , was not , for the London and Westminster , so profitable as the first half-year of 1858 , - ^ -rather- at variance with the general fact . already stated . . :. The deposits and current accounts in the London and Joint-Stock Bank also declined from 10 , 287 , 623 / , in June to 9 , 367 , 722 / ., or 919 , 901 ? . in December , and yet the amount of net profit was greater in the last than in the first six months of the year , and the ratio of net profits to paid-up capital was

      17-95 in the latter , and only 16-65 in the former . The ratio of dividends also to paid-up capital was only 11 * 25 per cent , in the half-year ended with June , and 16-25 in the half-year ended with December . This bank seems , therefore , to have found- ^ differing from its competitors—a more profitable employment for its diminished resources than for the larger sum entrusted to its care . This is somewhat contrary to the principle that profit depends on the sums entrusted to the banker and may require .

      The Union Bank shows a considerable increase of deposits on cim-ent accounts—1 , 114 , 2317 . more in December than in June ; and in accordance with principle , and the general state'of our commerce , it shows a very slight increase of net profits , and a very slight increase in the ratio of net profits to capital , and the same ratio of dividends to paid-up capital in the six -months ended with December , compared to the six mouths ended with June .

      The London and County Bank also shows an increase , though slight , of deposits in the last halfyear , a small increase of net profits , and an augmentation of the ratio of net profits to paid-up capital , and of the ratio of dividends , to paid-up capital from 5-00 to 6-00 per cent . The deposits : and current accounts in the Commercial Bank were less in the last than in the first half-year of 1858 by 32 , 197 / ., on a total sum of 935 , 0817 ., and its net profits diminished , as did the ratio , they bear to its paid-up capital ; while the ratio of its dividends was the same , and was at the

      rate of 6 per cent , per annum . We shall not now extend in detail our remarks to the remaining four banks , all of which were established in or ; since 1855 . We must observe however that both the City Bank and the Bank Of London —the former with 1 , 749 , 747 / ., amount of deposits and current accounts , at the end of December , and the latter with 1 , 300 , 903 / ., and the former with a net profit in the half-year of 17 , 38-2 / . —already exceed the Commercial on these points , which has the same amount of capital as each of them has ,

      and was established fifteen years before them . It would seem therefore that the new banks are not uncalled for . Their success has been great ; and in all of them the deposits and cm-rent accounts were greater in the last than in the first halfyear of 1858 . The total amount of deposits and current accounts , in tho whole nine banks , was , in fact , at the close of tho year— -notwithstanding the diminution in those of the Westminster and London Joint-Stock—only 302 , 793 / . less than at the

      end of Juno . We do not argue from this that the new banks have gained what the others lost ; on the . contrary , wo believe that most of the accounts with tho new banks are really now , accounts , ' other men becoming depositors and keeping a banker ; and that the accounts and deposits which the five banks have lost have buon the con ^ sequence of the commercial disorder which nffectod so many neraozi . s . Wo shall probably find it necessary to rofor to this very interesting subject .

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      Bank of Austiua . —Tho cash payments of the Banjc aro for the moment almost nuspondod , as all kinds of difficulties are thrown in the way of porsons who wish to obtain silver in oxchivngo for their notes . The rate of exchange on London is lOOfl . Austrian curronoy for £ \ Ci sterling , which is equivalent to lQfl . conventional currency for XI sterling .

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      No , 465 , February 19 , 1859 . ] THE LEADER . 249

  • Citation
    • Leader (1850-1860), Feb. 19, 1859, page 249, in the Nineteenth-Century Serials Edition (2008; 2018) ncse-os.kdl.kcl.ac.uk/periodicals/l/issues/vm2-ncseproduct2282/page/25/