Page:Hints About Investments (1926).pdf/216

 It will be seen that the total of the balance-sheet is more than thirty times the size of the paid-up capital, so that every £1 share in the bank gives its holder what may be called a remote reversionary interest in more than £30 worth of assets. He has, of course, no claim on a pennyworth until the holders of current and deposit accounts have been paid the whole of their £273 millions and all other liabilities have been met, so that if the assets were sold at the prices set against them his share would not amount to much more than £2; in fact, as we shall see later, the assets would probably fetch more, and it may be noted that besides the paid-up capital contributed by shareholders they have added just as much again out of profits held back and put into reserve fund. But the fact that for every pound that the shareholders have so invested in capital and reserve the public has put more than fifteen pounds into the hands of the bank for temporary employment enables the bank to spread the shareholders' risk by pouring out its funds over an enormous body of first-class securities and well-selected borrowers, and at the same time to earn a satisfactory profit by means of a narrow margin between the earnings on the assets and the payments due to depositors.

Looking more closely at the assets we see that