Philippine National Bank’s 1935 high record

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Part of The American Chamber of Commerce Journal

Title: Philippine National Bank’s 1935 high record
Language: English
Year: 1936
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Fulltext: 4 THE AMERICAN CHAMBER OF COMMERCE JOURNAL March, 1936 Philippine National Bank’s 1935 High Record Net profit ^3,720,000 on capital of ^10,000,000 includes, as usual, payments against capital loans by the “bank” sugar mills The Philippine National Bank had another excellent year incuts. during 1935, as items boxed on this page show. The items It is the repayments, especially of the sugar capital-loans, are from the bank’s 1935 yearly report. Net profit in round (hat help the bank to its dominating place in the sugar in numbers was P3,720,000. On December 31, 1934, the sur- dustry. Both the debtor mills (as well as those that have plus of the bank was P7,453,224; on December 31, 1935, paid off in full, or might pay off in it was P929.999 more, or 1*8,383,223. This 1*929,999 is planter-owners of their si.... , . r 25% of the net year’s profit, the sum the law requires to be taken up in undivided surplus until the surplus equals the capital of P 10,000,000. The law is Act 3174, brief and ex cellent, that rehabilitated the bank just over 10 years ago; that is to say, it was approved November 24, 1924. Under it, the bank paid the government last year, out of net profit, 1*739,249, against money granted the bank by the government at the time the act was passed. Before these repayments are made, the bank takes care of the re serve against its circulating notes. After surplus, reserve for notes, and aid money from the government arc several ly taken care of, in the order given, the bank could vote dividends; and these would go to the government as almost the sole owner of the bank’s 100,000 shares par P100 each. On the other hand, should the sur plus fall below 50% of the capital, then the bank must set aside 50% of its net yearly profit, instead of 25% as now, for surplus until this is restored to more than 50% of the capital. This is the simple law under which the bank operates. But it collects all the time, considerable sums paid on accounts that wen1 counted as dead loss 10 years ago and set up on the books at Pl each. So great has been the Islands’ recovery from 1921-1924, even during the worldwide* depression. The collections referred to are aside from the payments on capital loans of the* several sugar-mill corporations the* bank helpeel in this way. Such re payments, and the! sugar capital-loans repayments te>e>, are* abnormal to the bank’s business as a bank; in a few years they will not exist, they will not figure* in the* Iwnk’s net ye*arly gains. In other words, this governmentowneel anel government-manageel bank in the? Philippines, that is the* primary reliance* of Philippine* agriculture, business, anel industry, is not really making almost 40% a year on its capital. If sue-h a situatiem e*xisteel, it woulel be a most flagrant one indeed, since the* bank is the* people’s. On the other hand, the? sugar capital-loans tying the* bank up with the sugar industry as they elo, the* bank itself may not be in a position enabling it to state* clearly just what it might make* from its extensive* and regular banking activities independently of the* repayVital Philippine National Bank Data 1*21.741.1 "SB "Wffl , v full at any time) and the? shares, arc good patrons of the bank. Acting as their factor, the* bank handles their sugar. As this is a large portion e>f the Islands’ yearly crop, it provides the bank millions of pesos for exchange* banking; anel for its fiduciary and business services in the* shipment and sale of sugar, the bank has its com missions. The* bank, of course, will never lack sugar business even after the* last bank sugar mill has paid its last pose) of debt. It has its branches in the sugar-producing provinces, and eluring the long 15 years it has been doing business with the* mills and the planters it has built up goodwill of inestimable value. But it will soon lack the* repayments, since* they now sum less than P7,000,000 all told, and this will bring its profits inte> line* with the* use it may be able to make* of its resources in the straight business of banking. When this period is reached, it may be hazarded that t profits will hardly exceed 5 We are* unable* to see, in s policy, other than the recognition of the para mount interest of the* public in its solidity, anel in its services; and we* assume* this policy will continue, event ually te> the* point where* banking rates are* lowered to what they ought to be* in all countries financially sound. The? bank lowered interest rates at the* end of last yei to 10% are absi must come* down anel te> make* rates come down is a duty of this great state* bank. (Ob stacles in the way of this, including the* tax on bank deposits, shoulel be ob literated). If an industry begins in the* Islands, at prevailing bank rates, te) compete* with foreign imports, either it must fail, because* its competitors abroad pay reasonable bank rates only, or it must enjoy a bounty in some form: a monopoly, perhaps, as the governmentmade* cement enjoys, te>ge*the*r with a tariff. Then it may not fail, but this will be* only because the public is taxed heavily te> support it. For many years (he* Philippines have* paiel excessively fen cement, the supply coming only from within the* Islands, because of the* high tariff, and the* government’s supply, anel that for publie* works let to contractors, limited to the output e>f the* government plant. This is not sue*ce*ss in cemenl March, 1936 THE AMERICAN CHAMBER OF COMMERCE JOURNAL 5 making; it is success in tax collecting, and the distribution of this tax is widely among the poor. Cement goes into scores of bridges built under the revolving fund for that purpose; at these bridges, while they are being paid for, passenger carrying trucks, patronized only by the poor, pay heavy tolls until the cost of the bridges is liquidated—and the truck lines must get these tolls from their ticket revenue, as they do. Such things figure back into high bank rates. With all the building revival in America, cement is only SI.65 a barrel, about 30 cents a barrel having been added during the past year; and yet this price is far below what the public must pay in the Philippines. Where bank rates are high, every thing is high: you calculate from the basis of the worth of money at usury; that is, on loan, in use. (We have long wanted a place for this aside about cement, and find it now; we have wanted to correct the public impression that cement is cheap here, the fact being that it is extra ordinarily high). The sugar capital-loans having been summed up last year, this will be done again. These loans (on which more dis cursive comment will be found in our story of Bacolod and Occidental Negros, in this issue) were originally some 1*48,000,000; or better said, about this figure when the bank was rehabi litated in 1924. There has been paid on them some 1*41,000,000; and byway of interest, some P17,000,000, the total being 1*58,000,000. There remains by way of unpaid principal, some 1*7,000.000. But the most tardy of the mills is in such an excellent position that offers to purchase are being received; and also, the planter shareholders them selves come forward with a refunding plan to pay off this balance in a few yearly equal installments. Nothing more is needed to show that a million tons of sugar a year is the backbone of all prosperity here, to say nothing of its being the fortune of the Philippine National Bank: and there fore, quite distinctly, that of the govern ment and of the general commerce and industry of the Islands. One of the boxes shows the resources of the 10 provincial branches and 39 provincial agencies of the bank, a total in itself of nearly P33,000,000 and a fundamental expansion of the bank’s services. Note that the Bacolod branch in Occidental Negros has resources of 1*7,958,749; and that at Iloilo, P9,059,140, while that at Cebu has resources of P3,864,424. Though the general commerce of Cebu excels that of Iloilo, sugar excepted, on account of sugar Iloilo has the much richer branch-bank. Bacolod’s branch has twice the resources of Cebu’s. Another factor to place just here is the period during the year that the'bank makes its greater profit. It is when sugar is moving briskly to the United States. Of the P929,999 (25% of its net 1935 profit) the bank added to its undivided surplus last year, P683,583 related to the first half of the year when sugar shipments were heavy, and only 1*246,416 to the last half of the year when sugar shipments were light. Besides excellent public revenue conditions in the sugargrowing provinces, these provinces are in the front rank in public improvements, especially public buildings and fine systems of highways improved with permanent bridges. An exception the want of a modern port for Negros. National Bank Branch Resources Bacolod.......................................................... 1’7,958,749 Baguio.. .. 571,955 Cabanatuan 2,132,620 Cebu 3,864,424 Dagupan.......... 866,605 Davao.............. 1,672.366 Iloilo................... 9,059,139 Leguspi.......... 1,079,591 Lucena............. 1,212,583 Tarlac.......... 711,9-16 Agency Resources Abra................... 9.30-1 Agusan ................ 16,274 Albay................................ 49,586 Bataan............. 4,009 Batangus............ 329,567 Bohol................ 183,820 Bulacan................ 67,601 Cagayan . . .. 117.649 Cainarincs Norte. 26,598 Cainarincs Sur. . 147,502 Capiz............................. 111,714 Cavite . . 17,578 Cebu............. 40,466 Cotabato......... 7.928 Iloeos Norte. . 526,712 Iloeos Sur 195,375 Iloilo............... 34,234 Isabela . 143,266 Laguna. .. 81,791 La Union .... 111,422 Leyte................ 250,697 Marinduquc . . . 21,514 Masbate........................... 18,881 Mindoro.............. 5,905 Misamis Oriental. 111,536 Misamis Occidental. . 20,485 Negros Occidental. 13,388 Negros Oriental........ 57,294 Nueva Ecija................ 54,013 81,091 Pampangu....................... 298,004 Pangasinan...................... 16,316 Ilizal.................................. 19,452 14,671 99,557 Tayabas......................... 18,173 Zambales......................... 13,446 Zamboanga...................... 161,900 Resources of the bank’s branches compare with those of banks in American cities of 50,000 to 100,000 population; that is to say, the commercial centers in the farm states. No other fact better illustrates the economic advancement Amer ican commerce has stimulated in the Islands: the cities (with out charters) these branches serve are not so large, but in the sugar-growing provinces their hinterland is richer. The agencies are most economically managed. They are associated with the provincial treasuries and the treasurers are paid a mere gratuity, 1*50 a month, or perhaps 1*60 or a little more, for managing them. Yet a number of them have very material resources: Batangas, 1*329,567; Ilokos Norte, 1*526,712; Leyte, 1*250,697; San Fernando (Pampanga, a sugar region), 1*298,005. Among the 39, no less than 13 have resources above 1*100,000 each, while their total resources are 1*3,559,012. Agencies in the prime cropping prov inces where farms and plantations growing the main export crops, sugar, Manila hemp, copra, have resources mainly in loans. In general their de posits are small, their interest revenue high. They are therefore of primary importance in the making and moving of crops for export. The same rule prevails in the great rice provinces in the central Luzon valley, where rice is grown for interprovincial export. This changes when you reach the Ilokos provinces, of small farms, more niggardly soil, and perforce a harderworking and more thrifty population with whom money counts large. Here the husbandman supplements his farm ing with any industry he may carry on; and notably his family does so. There are sons off in Hawaii, thousands of them, working on the plantations there and sending back to their homes some of their wage's. In the bank branches here, deposits are large and loans small; the people are poor and have a horror of debt. They have their ancient weaving industry, good home-woven cotton tex tiles at moderate prices. In Manila they have their own stores selling these goods, bed spreads, dress patterns, towels. The women arc eager merchants, most capable; they have pride in their ware's, as they ought to have. What a sight it was, hardly to be surpassed at a great fair anywhere, during the closing period of the Philip pine carnival, to see girls and women mount the counters of their provincial exhibits and unfold these cloths and spread them out to tempt the milling crowds to buy. In a single booth you saw as many as a dozen women at this. Their peasant dress was colorful, the blues they like (that Tagalogs don’t much like) predominating. All lights glowed their brightest. Handling the heavy cloth was hard, but the women laughed about it; and they kept at it, until morning —until the last customer strolled sleepily away and the last hope of selling anything more went with him. Then they packed and moved the unsold goods back to their stores and their market stalls. They are keen enough to know the value of this industry; they know the market grows better every year, and that their industry is going to net them more money all the time. Such folk want small bank loans; it is a neat balance in their bank books that overjoys them. Applaud them for the best-founded large household industry in the Islands, and for many other thrifty habits besides. (/’/ease turn to page 8) THE AMERICAN CHAMBER OF COMMERCE JOURNAL March, 1936 gained the Koreans’ confidence, Chosen soon (•eased to be a problem. Land titles were cleared; schools, hospitals, agricultural stations and a leper colony were established. Koreans gained a large measure of self government. Saito resigned after 10 years, and was raised to a viscount for his services. In 1927 he represented .Japan at the second disarmament conference, an incident of which, till now unpublished, lie related to me. The United States and Britain were at loggerheads over cruisers. Intervention bv Viscount Ishii and Viscount Saito effected a tentative agree ment, and the American delegation cabled Wash ington. In the absence of the Secretary at a golf game, a subordinate handled the inquiry in a routine way: ''Adhere to previous instructions.” The conference broke up without accomplish ing much. Saito told me he believed the psycho logical moment when the world was ready to accept armament control had been lost. On his return to Japan lie was made a member of the imperial privy council, advising the emperor on knotty state matters; and when past 70 he returned for 2 years to the governoship of Chosen . .Soon came the Manchurian incident, the campaign at Shanghai, and world-wide suspicion of Japan. Conditions in Japan were extremely tense. Constitutional and representative government seemed to have been caught in the avalanche of warlike sentiment. Japan’s greatest banker, Inouye, had been murdered. And on May 15, 1932, young military and naval officers assassinat ed not only Baron Dan but Premier Inukai as well. Said Saito: "Into this maelstrom of chaos, with the military marching through Manchuria and the navy guns still pointed at Shanghai, His Majesty commanded me to take charge of the government. I devoted my energy to bringing Japan into the middle of the road. Fevered brows had to be cooled and the rule of reason as opposed to hysteria had to be restored” Japan’s withdrawal from the League of Nations was necessary in order to improve the domestic situation within the empire, Vicsount Saito felt. That the career of Viscount Saito as premier was stormy is well known to all. Yet literally day by day Japan’s internal condition improved and her position abroad was strengthened. After 2 years as the head of the government, Viscount Saito resigned as premier on July 3. 1934. Admiral Kcisuke Okada was commanded to form a cabinet and from July 1934 until the present day he has carried on the broad policies initiated by Viscount Saito. Four of Saito’s cabinet members aided him. One of them was the financial genius, Korekiyo Takahashi. The purists who struck at dawn on February 26, robbed Japan of its strongest financial mind. It is the opinion of many observers that his loss will be an irreparable blow to Nippon in this era of rapid governmental and commercial expan sion when clear headed, long vision is so needed to steer the financial ship of state. Takahashi was a colorful figure. He batted around the world in his youth, in California, South America, Europe. He dabbled in politics and government in the middle ’90s became chief of Japan’s monopoly-patents bureau. With his facility in English and his understanding of con tinental ways, he traveled in Europe studying patent laws. But Takahashi did not find his stride until he went into banking. His first brilliance came in obtaining loans abroad to help finance the Japanese-Russian War. By 1911 he had risen by his bootstraps to the presidency of the all powerful Bank of Japan. Two years later lie resigned to become minister of finance and acquitted himself with distinction. 'Phen he again took to politics as president of the Sciyukai party in 1924. But when Saito needed his assistance Taka hashi took the portfolio of finance again. Always outspoken, fearless in his warnings, dynamic in his actions, Takahashi was a thorn in the side of those who resented restraint, who felt that funds for the military should be supplied without question and without proletarian prerogative. His recent warnings regarding bonded indebted ness did not set well with the purists and it is quite logical that to be successful in their purge Takahashi had to go. Although outbursts of violent political oppo sition have been deadly in their toll, the progress of Japan’s governmental development has been inexorable. Premier Hamaguchi died from the wounds of a purist. A finance minister met death in 1931. Baron Dan added to the toll. The May 15 (1932) incident is still subject for conversation in Tokyo. Count Makino, who was wounded in the present purge, was a marked man in 1932. His house was damaged along with those of other Japanese leaders. The recent Japanese elections clearly showed that the people, the common people who foot the bills, expressed themselves at the polls and demanded more voice in the government. In short, whether appreciated by the rank and file or not, parliamentarian government is a growing force in the life of the Japanese nation. At present the army and the navy are not responsible to the government, only to the em peror. Soldiers and sailors do not come under civilian jurisdiction. And even when minor police incidents have happened, men in army and navy uniforms have questioned (with force when necessary) the right of police to interfere. The purist theory is that each man in uniform is a representative of the emperor and therefore if civilian police place the hand of restraint or regulation on a man wearing the emperor’s uniform, he is insulting the emperor! The control the civil government can exercise on the military is the matter of annual financial requirements. But should the budget be not approved, the amount provided the year before becomes automatically operative. But to purists, who are certain beyond a shadow, just as positive of their divine appoint ment as Joan of Arc that God sent them to save the nation, budgets, elections, and liberal poli cies are but subterfuges to undermine the glory of His Majesty, the Emperor. Ultra-national ism breaks forth with the sword. Nevertheless, the driving force of the ballot toward the goal of popular government in Japan is as unrelenting in its forward movement as is the power of wind, sun and tide. The world was shocked at the untimely death of Viscount Saito, General Wata nabe and Finance Minister Takahashi. Three of Japan’s best minds were lost to the Empire. But their spirit will lead where they themselves could not go on. Philippine National Bank’s . . . (Continued from page 5) The bank is 20 years old this year. It was originally chartered in 1916. It cut down its note circulation 1*2,500,000 last year; keeping surplus notes in its vaults, it saves something in taxes. It raised its deposits in the United States, to take its share of the Manila Railroad bonds the government helped the road retire at London’s offer of 80 cents on the dollar. Its most singular experience during the year was the rise in individual deposits from 1*28,530,983 to 1’45,288,555, an increase of nearly 1*17,000,000 in the 12 months. While some of this was bookkeeping, as the classification of the Metro politan Water District account as individual instead of a government account, about 1*13,000,000 of it was a genuine upping of individual accounts; and best of all, numbers of business company accounts. But while this is best as a good bank showing, it of course is not best as a good business showing; for it shows that capital is accumulating in the Islands that commerce and industry either can not or will not use, and it goes back to the con tention made at the outset of this summary, bank rates are still too high. This however is not dogmatically true, it is only a true general ization. Last year business companies, some of them large, dealing with this bank, turned over drafts into cash balances. This healthy situa tion is also reflected in the increased deposits. The fat goes with the lean. IN RESPONDING TO ADVERTISEMENTS PLEASE MENTION THE AMERICAN CHAMBER OF COMMERCE JOURNAL