and export more than we import to a sufficient extent to enable us to pay this foreign interest, we should prosper and not feel the cost of the war too much. I am aware, however, that we have a small population and a great country to develop, that immigrants may come in large numbers, that railway building is far from being at an end, and that our credit will be good in all markets where money can be obtained. So that although our Victory loans have taught our people to invest their savings in securities, and have made manifest an ability to absorb securities which has amazed us, we shall doubtless, as in the past, borrow abroad for our larger schemes of development and thus still further mortgage the future of this country. The wisdom of borrowing depends in each case upon the resulting gain in productive power, but as a rule we shall do well in the near future to look with suspicion upon loans obtained abroad, and to remember that the interest and amortization of such loans is, like the farmer's mortgage, the shadow over every working day. I must not close my remarks without a reference to the very marked change which has come about in the banking institutions of the world. Before the war modern transportation and the cable were so increasing the transactions between the various nations, that bankers in Great Britain and the United States, not hitherto dealing in foreign exchange, were beginning to discuss the establishment of foreign branches. The war, by its huge demands on finance, accentuated by high prices, has had the effect of causing amalgamations of banks on a large scale, in order that adequate support to business might be possible under the new conditions. Several of these amalgamations have, however, been mainly for the purpose of joining British banks of deposit and discount of the ordinary type to banks established for foreign business. One great American bank which has lately gone into foreign fields has already established 39 foreign branches, and announces that it will before long have one hundred such establishments; so that we, who have always been more or less in the foreign banking business, must look to our laurels. In the meantime, without any recent amalgamations, our own figures have reached a total which would have been most noticeable in any financial centre twenty years ago. The new Board of Directors was then elected-including the President and Vice-President as subsequently re-elected: SIR EDMUND WALKER, C.V.O., LL.D., D.C.L. JOHN HOSKIN, ESQ., K.C., LL.D., D.C.L. HON. W. C. EDWARDS. E. R. WOOD, ESQ. ROBERT STUART, Esq. SIR JOHN M. GIBSON, K.C.M.G., K.C., LL.D. G. F. GALT, Esq. A. C. FLUMERFELT, ESQ. HON. GEO. G. FOSTER, K.C. PRESIDENT CHAS. COLBY, ESQ., M.A., Ph.D. G. W. ALLAN, ESQ., K.C., M.P. F. P. JONES, ESQ. C. N. CANDEE, Esq. J. S. MITCHELL, ESQ. Canada Bills Payable Balances due to other Banks in Canada Balances due to Banks and Banking Correspondents elsewhere than in 353,158,816.04 104,106.35 10,322,592.58 118,347.00 Acceptances under Letters of Credit 13,048,927.03 $408,336,483.68 Dividends Unpaid 4,376.86 Dominion and Provincial Government Securities, not exceeding market value $61,971,163.49 26,262,119.11 36,165,259.20 British, Foreign and Colonial Public Securities and Canadian Municipal Securities Railway and other Bonds, Debentures and Stocks, not exceeding market value Call and Short Loans (not exceeding 30 days) in Canada on Bonds, Call and Short Loans (not exceeding 30 days) elsewhere than in Canada tion Fund Other Current Loans and Discounts in Canada (less rebate of interest) Liabilities of Customers under Letters of Credit, as per contra Less balance of mortgage assumed Mortgages on Real Estate sold by the Bank Bank Premises at cost, less amounts written off 29,884,242.13 6,018,039.70 13,843,130.58 28,018.919.10 856,108.55 199,672,294.63 17,617,641.44 13,048,927.03 103,320.80 CANADIAN WAR POLICY AND FINANCE ANNUAL ADDRESSES AND REPORTS* OF THE ROYAL BANK OF CANADA Bank's Annual Statement by C. E. Neill, General The statement before you to-day is the best that Review of the has been submitted to the shareholders of this Bank. Total assets are $427,512,982.91 as against $335,574,186.52 last year. A portion of the increase $27,819,291.82 arises from the purchase of the Northern Crown Bank. Total deposits are $332,591,717.92, the growth for the year being approximately $80,000,000. The relatively large increase in free deposits as compared with interest bearing deposits is due to the transfer of funds to the Dominion Government during the month of November on account of payments on the last Victory Loan. There were heavy withdrawals from the Savings Department in connection with previous Victory Loan issues, but the decrease in interest bearing deposits was temporary, and it may be expected that the withdrawals in connection with the present loan will be made up in due course. It is interesting to note that subscriptions to the last Victory Loan made through this Bank aggregated $104,507,400, of which amount $14,774,564 was due to conversions, the number of our subscribers was no less than 127,085. The expansion in our circulation continues, the increase for the year being over $11,000,000. The excess is covered by the deposit in the Central Gold Reserve$26,000,000. Current loans show a substantial expansion, indicating that we are doing our share in taking care of the commercial requirements of the country. The liquid position of the Bank is more favourable than it was last year, the percentage of liquid assets to liabilities to the public having increased from 53.9% to 56.59%. From the standpoint of cash reserves we are also stronger, the percentage of cash to liabilities to the public being 17.13% as against 16.36% the previous year. Our additional investments are chiefly in securities of the Imperial Government and Canadian Government issued for war purposes. The substantial growth in the Bank's assets has resulted in a pronounced increase in earnings. Net profits for the year were $2,809,846.24, being 10.19% on the combined capital and reserve, *Note. Annual Meeting Jan. 9, 1919. For History of the Bank see Supplement to The Canadian Annual Review for 1910; For preceding Reports and Addresses see Volumes for 1911-17. as compared with $2,327,979.51, 8.82% on capital and reserve the previous year. The marked growth in the Bank's general business is due to the activities in all branches of trade and increased value of agricultural production. We must now grapple with the problems of a period of deflation and reconstruction, and we do so with the strong conviction that no serious difficulty will be encountered in surmounting them. Address by of the Bank. I am sure I am giving expression to the thoughts of all present in saying that uppermost in our minds at this time are feelings of relief and thankfulness for the end of the terrible war with which the world has been afflicted for four and a quarter years-an ending of triumphant success to the Allies, without which any relief or thankfulness would be inconceivable. With the relatives of those who have given their lives in our cause, we deeply sympathize. The valour and achievements of Canada's soldiers on the battlefield fill us with pride, and gratitude for their heroic service should be shown in tangible form. The country is their debtor. Satisfactory employment should be found for every returning soldier who is fit to work, and relief extended to the maimed and crippled. In this Bank, unless there is some good reason to the contrary, every officer who enlisted and who applies for reinstatement within a reasonable time after his return will be re-engaged on the salary to which he would have been entitled had he continued in the service, subject to reasonable adjustments, where necessary. The sudden collapse of Germany and her allies has brought us face to face with the grave economic problems which had been foreseen. Not only must several hundred thousand fighting men be reabsorbed into civil life, but an industrial army must be transferred from the manufacture of war materials to other lines of production. Moreover, before the war financing is completed, it is estimated that our national debt will exceed $1,800,000,000, and in addition we must provide for an annual pension load of approximately $30,000,000. Such an outlook would have been viewed four years ago with widespread pessimism. To-day it is met with confidence, well founded upon abundant natural resources, demonstration of ability to adapt ourselves to unusual conditions, and wonders performed during the times of war through organization and skilful leadership. In spite of the drain on our man power, industrial efficiency is higher than in 1914, and capacity for production has increased; while many enterprises which were then feeling the stress of hard times are now firmly established. Our exports since 1914 have enabled us to regain the balance of trade which for many years previous had been against us. Our general prosperity is evidenced by the striking increase in bank deposits, and by the success of the Victory Loans, particularly the most recent. In that case the sub scription per capita was greater than for any other loan made by the warring nations with the exception of the third British issue. The grain crop of 1918, though light in some sections, has proved the most valuable in our history, and is estimated to be worth $1,235,000,000, as against $825,000,000 in 1915, when the harvest was much more bountiful. The increase of $410,000,000 is entirely due to the high prices prevailing. With improved shipping facilities and the marketing of reserve stocks of grain in Australia, India and the Argentine, lower prices in the future may be anticipated. Increased production and improved farming methods are therefore vital in order that the value of our exports may not be lessened. A beginning has already been made in this direction by the Dominion and Ontario Governments, which are offering special inducements to returned soldiers to settle on unoccupied lands. A desirable type of immigration may be expected from the United States, and all settlers with experience in farming will augment our revenue. Any influx of unskilled labour during the period of reconstruction would only add to our burdens. Exports of pulp and paper continue to increase. In the last fiscal year they reached a total value of more than $71,000,000, and the next returns promise to be higher. In this connection the Government will be well advised in not imposing restrictive regulations when they interfere with increased production. There is also a steadily increasing demand, both in home and foreign markets, for Canadian fish. The expansion of this industry will help to decrease the cost of living, provide more employment and add considerably to the national wealth. Our waterpowers constitute one of our greatest assets, and as these are developed we may expect an influx of capital and the establishment of important industrial enterprises. It is to be deplored that so much of our raw material is sent out of the country and returned in part in the form of manufactured goods. Wherever we possess an advantage in basic supply, it should be our aim not only to satisfy home demands for the finished product, but to find markets for the surplus outside of Canada. We have every confidence that the trade mission established in London will be able to secure for us a share proportionate to our sacrifices in the business arising out of reconstruction work in the devastated countries. Arrangements doubtless will be made for an equitable distribution of orders in Canada, and these will require financial support from all the banks similar to that accorded to munition and other war contracts. Some little time must elapse before trade projects can bear fruit and factories be refitted. To provide for the consequent period of unemployment, the Government has announced its intention of proceeding with public works, which it is hoped will be confined to improving our waterways, port facilities and public roads, and in addition has offered loans for housing purposes, through the provincial authorities. As all our trade enterprises both at home and abroad must be financed by Canadian capital, their success will be measured by the |