Profits in Bonds

Last week U. S. banks great and small sedately advertised their annual year-end statements and financial pages reported their year-end earnings. No news were their latest over-all statistics: that they had more deposits than ever before ($42,022,000,000 in Federal Reserve member banks, up $4,596,000,000); that due to the inflow of war-scared gold from Europe they had record excess reserves ($5,200,000,000, up $2,128,000,000); that they had a record amount of idle cash (almost $6,000,000,000, up over $2,000,000,000).* But a striking fact was that in spite of this torpor, more than one bank succeeded in improving its profits in 1939. Most of those which did made their extra money by trading in bonds. The average price of U. S. Treasury long-term bonds rose from 104.2 in January to 109.5 in June, dropped to 100.5 in September, rose to 106.9 by year's end. High-grade municipal and corporate bonds gyrated just as wildly. Smart bankers who gauged the right times to buy and sell turned a pretty penny. Some were also able by buying bonds relatively cheaply during the war slump to improve the yield of their portfolios.

The year-end reports showed:

>Five biggest (in deposits) U. S. banks were: 1) Chase National ($2,803,730,000), 2) National City ($2,331,258,000), 3) Guaranty Trust ($2,088,427,000), all of Manhattan; 4) Bank of America, San Francisco ($1,482,792,000); 5) Continental Illinois, Chicago ($1,324,095,000).

>Highest earnings were reported by Bank of America, $17,734,076, including security profits, highest since the bank's organization in November 1930, and 21.7% above 1938. From this, Bank of America sent $8,143,076 to surplus, earmarked $5,355,834 of it for a complete write-off of some of its foreign credits.

>Most spectacular performer and No. 3 in profits was Continental Illinois, headed by onetime FDIC Boss Walter Joseph Cummings. During the year in which Continental Illinois retired the last $25 million of $50 million of preferred stock held by RFC, the bank wound up with a net profit of $16,526,010, including $6,882,388 in profits on securities.

>In Manhattan, biggest earner to report last week was National City, which listed $17,651,170, including profits of $6,897,525 on trade in securities. Not counting securities profits which National City, like many another bank, cannily retired to reserve, its net was 38.7% above 1938.

>Winthrop Aldrich, chairman of Chase National, declared that the U. S. ought to dig up its gold hoard at Fort Knox, Ky. and other depositories ($17.8 billions, two-thirds of the world's visible supply) and put it back in public circulation, in order to preserve its monetary value "for ourselves and for the world."

>Swarthy President Lawrence Mario Giannini of Bank of America, who thinks Secretary of the Treasury Morgenthau is persecuting him, threatened that his institution would give up being a National bank, become a State bank unless Mr. Morgenthau quit hectoring him by sicking SEC on him.

*Idle also were the bank balances of U. S. depositors. They turned over their money only 13 and one-half times in 1939, compared to 14 times in depressed 1938, 30 times in 1929.

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