The Express.
London, England, 1863-02-09 00:00:00

HIGH WATICIL AT LONDON BRIDGE.

Tel! Wm.
1.-Moalow—Yarning. sb. 62te.....Afternom, 60. Ma.

LONDON, MONDAY, FEBRUARY 9.

Ar a time when so many new banking and dis-
count companies are daily starting up, it is im-
portant to keep a watchful eye on the proceedings
of the banking interest generally ; and, as there is
no reason to apprehend that the old-established
banks will be tempted to depart from the
path which has conducted them to their
present successful position, vigilance should be
especially practised with regard to the new com-
panies. The older banks have for some time past
settled down into a regular business groove, from
which they will not be moved, unless, indeed,
undue competition on the part of younger rivals
should compel them to resort to expedients like
theirs. It is scarcely necessary to say that such a
course must be strongly deprecated, for reckless
competition on the part of bankers and money-
lenders is sure to prove fruitful of evil.
Experience has shown that in banking, as
in insurance, and many other kinds of business, a
certain ratio of profit is requisite to compensate for
certain expenses and for occasional losses, as well
as to admit of a fair remuneration to the pro-
prietor& Let that ratio be disturbed, and a host
of evils follow. If accommodation be granted to
the borrowing public on terms unremunerative to
the lender, it is not cnly the lender that suffers,
for, if he be ajoint-stocklbanker, he is frittering away
the money of depositors, whose interests, as well as
those of his own shareholders, must be jeopardised.
There have been plenty of proofs that an ill-ma-
naged bank may spread embarrassment far and
wide. Apart from the disastrous results to share-
holders and depositors, • system of reckless
trading may be encouraged amongst the entire
community within the scope of the operations of
a bank of this character, for people who ought to be
merely merchants and brokers are converted into
wild speculators, and the legitimate trader finds him-
self placed at a serious relative disadvantage. To bor-
row an illustration from another order of things,
an unscrupulous banker is like an unfair handi-
capper,who gives some horses only a feather weight
to carry, while he virtually puts other competitors
out of the race. Such a state of affairs cannot last
long ; it carries within itself the seeds of collapse,
and the goal itself is ruin, but as long as it does
last it is peculiarly mischievouti.
Such being amongst the consequences of eater
sive banking competition, it is satisfactory to find
that, so far as can be gathered from the published
records of such of the new banks as have
as yet called their shareholders together,
there is no intention of departing from the safe
and beaten track, or of initiating new theories of
banking. Within the last few days there have
been meetings of the proprietors of three of the
new banks which have lately got to work—namely,
the Alliance, the Imperial, and the London and
Middlesex. It may be interesting to refer for a
moment to their respective statements.
Of the three, the Alliance Bank of London and
Liverpool makes by far the best show. It is
steadily calling up its capital, and will in a few
months have such a sum paid up as will enable it
to take a respectable position amongst the exist-
ing establishments. At the 31st December last—
the date to which the first balance-sheet and state-
ment of accounts, now submitted, are made up—
the paid-up capital amounted to 245,6051.—a
very moderate sum, certainly, for the basis of •
bank of so much pretension ; but a call since paid
has raised the actual total to 340,0001. ; on the
13th April 100,000/. more is due, and by about
July the paid-up capital will be increased by a
further call to a total of 500,0001. Some of the
most successful of the preeentinatitutionshave found
this amount of capitalsufficient to command the con-
fidence of the public : for example, the paid-up
capital of the London and County Bank is at this
moment only 590,0001., though it must not be
overlooked that that bank has, in addition, a
reserve fund of 175,0001., which virtually is an
increase of the paid-up capital. It is probably
the belief on the part of the public that the paid-
up capital of the Alliance Bank is, or will shortly
be, adequate to all requirements, which has caused
as many as 800 deposit or current accounts to be
opened with it, representing a total of 1,019,1801.
It must be admitted that this makes a good begin-
ning, and we should imagine that the directors
and managers have not let the grass grow beneath
their feet, especially considering that this sum
has been acquired within the short space
of about seven months in London and six
months in LiverpooL Indications of prudence
are at the same time to be found in the retention
of 278,9781. of cash in hand and "at call," as
against 1,019,1601. of liabilities to customers.
Yet the amount of net profits realised seems to
bear but a small proportion to these figures. The
gross profits, it is true, are put at 16,0121., but it
is really vain to talk of profits until allowance has
been made for the 3,0781. paid as interest on cur-
rent and deposit accounts, for the 6,892/. of cur-
rent expenses, and for the 3,3891. representing
rebate of interest on bills still running, which has
been carried to "profit and loss new account."
Deducting these various sums from the 16,0121.
styled " grow profits," there remains a real net
profit of only 2,652/. as the result of the whole of

THE

!this bank's operations foe the six or seven)
months since its formation. Shareholders
might almost be excused if they showed imps-
tlenoe at such small gains, and ►ndifferent obser-
vers might wonder bow the shares have come to
command 6/. and 71. premium in the market.
But allowance has to be made for several draw-
backs, which will not be felt with equal force in
the future. For example, the expenses ought now,
under proper management, to be almost at their
maximum, while the profits ought to increase
steadily as the bank rises in public estimation.
For two or three months of the period under
review the bank's paid-up capital was but 40,0001.,
yet its expenses were probably running on at
almost the same rate 1111120 W. The Alliance deserves,
moreover, to have the fact placed prominently on
record that it is the only one out of the three banks
mentioned at the commencement of these remarks

that has had the courage to make provision on the
face of its accounts for " rebate" on bills not yet
due. To talk of banking profits without allowing for

rebate is perfectly absurd—almost as absurd as
though an Assurance Company were to treat as
profit all the premiums it receives ; yet, so far
as the published accounts show, neither the Im-
perial nor the London and Middlesex Bank makes
any provision under this bead.
The operations of the Imperial Bank have not,
as yet, reached to one half of the extent shown by
the Alliance, its paid-up capital being, at the 31st
December, 99,0801. (as against 246,605!. of the
Alliance), and the amount of current and
deposit accounts being 489,123!. as against
1,019,160!. of the Alliance. Yet the

Imperial has been at work almost as many
months as the Alliance, having been
opened for business in June last. When we
glance at the profits, the result become, much
smaller. The gross profit is put at 5,0441., but
after deducting 3,3621. for current expenses and
ground-rent, there remains only 1,6811. to be car-
ried forward to " profit and loss new account."
The accounts say nothing about rebate, so that it
is impossible to tell whether there has really
been any profit at all on the six or seven
months' business. Moreover, the 4,3651. of
" preliminary expenses" remain as yet entirely
unliquidated, and a charge upon future profits.
There does not seem to be much in these results
to warrant the valuation of 61. premium at
which, if our memory does not deceive us, the
shares in the Imperial Bank were quoted at one
period, when the Stock Exchange was in a san-
guine mood. The market now rates them at
only die. to I premium, or, say par, though
they ought to be much better worth a premium
now, when the Bank has attracted nearly half a
million of customers' money, than they were
before this was accomplished. The chairman
remarked at the recent meeting that "for some
" months they had only about 45,0001. of paid-up
" capital, and it required great care on the part
" of the directors to husband their resources, and
"at the same time give such accommodation as
" would advance the interests of the institution.
" A chief aim with them had been to avoid lend-
" ing money on dead loans, or loans for a long
" period, but rather to put it out on short loans
" on good security, or in discounting bills at short
" dates, turning the money over and over again
" as rapidly as possible, which he took to be the
" true secret of successful banking." This is
very correct and proper, but it is difficult
to imagine that the directors have had a great
deal of " husbanding " to do with a paid-up
capital to the magnificent amount of 45,0001.
'We must not be too hard, however, upon the
Imperial Bank. "Time," as the chairman
most truly observed, "is required for such
" an establishment to attain to permanent mucosa."
The position of this bank is evidently, as yet,
somewhat experimental, but there is nothing in it
to disturb the equanimity of the shareholders'; sod
when the directors declare that " their primary
' " object has been, not so much to realise large
" immediate profits, as to conduct the affairs of
" the bank on sound and safe principles, so as to
" secure public confidence, which they know is
" essential for the continued prosperity of the
" undertaking," it is impossible to withhold from
them commendation for their sobriety and caution.
Meanwhile the paid-up capital is being increased,
by another call, to a total of 150,0001.
When the position of the London and Middle-
sex Bank is looked into, it is almost impossible
to repress a smile at the idea which it gives
of playing at banking. A meeting of the share-
holders was held on the 28th of January, with
Lord TORYINGTON in the chair. The total amount
of the paid-up capital of this establishment is
only 14,9481. The period to be reported on was
only four months, but it is to be borne in mind
that this bank is not entirely a new one, inasmuch
as it has been formed on the remains of the Unity
Bank—an establishment which, after eschewing
for some years our advice to wind up,
has at last acted upon it, and trans-
tarred its 170,0001. of deposits and balances
to the London and Middlesex, though (as the
chairman of the latter bank is particular in stating)
the Unity retains its own liabilities. Owing to
the nucleus of business thus exceptionally acquired,
the total deposits and balances of the London and
Middlesex Bank are 261,7431. As against
these liabilities, its cash in hand is but 49,8781,
The accounts are neither so explicit nor so full as
could be desired, but they appear to show a
" profit" of 3,5591., " after payment of interest
"on customers' balances." Lord ToaaiNcrros is
reported to have stated that " after paying interest
" and all current charges, they had realised dur-
" ing the four months 3,5591., which he thought
" extremely satisfactory ;" whereat some share-
holder of an optimist turn is reported to have
cried " hear, hear," but we confess we do not find
his lordship's statement borne out by the abstract
of accounts before us. As we read them, 1,809/.
of " current expenses" has to be deducted from the
above-mentioned sum of 3,5591., and no mention
whatever is made of rebate on bills yet running,
so that we do not clearly see our way to any profit
at all. This view is confirmed if regard be had to
the further sum of 2,4391. standing against the
shareholders ander the head of " preliminary
" expenses." If to this latter outlay be added
the 3,4501. expended on " bank premises," it
almost requires a microscope of some power to
discern the residuum of the paid-up capital of
14,9481.

Ws disclaim all desire to press hardly on
these new concern; but we should strongly
advise the shareholders in the London and
Middlesex Bank either to pay up • respect-
able amount of capital, or to arrange an amalga-
mation with some other company. Joint-stock
banking success depends upon attracting an ade-
quate amount of deposits, and this is simply a
question of public confidence. If a body of bank
proprietors have so little confidence or spirit
that they will only put their hands into their
pockets to the extent of 15,0001. of capital, how
ran they expect the public to rally round them,
and pour their hoards into their till 1 No adequate
advantage can ever result from playing at banking
in this petty fashion.

Our object is gained if, at a inmost when new
banking prospectuses are so nuinerous, we lime
succeeded in showing that banking success cannot
be reached. by any royal road or short cut, but
can only be acquired by care, perseverance, and
time. No one should enter into a new banking
partnership except with a deliberate regard to
these essential conditions. Meanwhile, it is
satisfactory to notice the recognition on the part of
the directors of the new establishments that, how-
ever slow may be their program, they must pro-
ceed cautiously and prudently, as the only means
of attracting that degree of monied adhesion from
the public in the absence of which shareholders
had better employ their own capital individually,
instead of throwing it into a joint-stock fund, to
be eaten into by expenses.