St George Keeps On Slaying The Challenges

The Age

Monday February 18, 2008

Danny John, Sydney with Marc Moncrief

ST GEORGE Bank is expected to re-assure investors that it has so far escaped the financial woes emerging at bigger rival Commonwealth Bank.

While the country's fifth largest bank has raised its home loan rates at the top end of the two most recent hikes as it too feels the pinch from the global credit crunch, it is understood St George is so far experiencing little financial pain on its bottom line.

Arrears across its portfolio of loans remain low, repossessions of homes still stand at just 80 from its book of 500,000 mortgages despite rising interest rates.

Since last October, the bank has raised nearly $3 billion in extra funds to meet the demand for increasing lending.

One clear signal, according to market watchers, has been the lack of any public pronouncement from the bank about a change to its guidance on its 2007-08 results.

It indicated last October that it anticipated a 10% rise in EPS for the year ending this September and re-affirmed that at its December annual meeting.

The bank, which turned in a 13% lift in net cash profits of $1.16 billion and a near-12% growth in EPS for 2006-07, closes its books for its current half year at the end of March.

It is due to disclose its interim profits and EPS performance on May 6.

Analysts will dissect in particular detail the make-up of both figures after CBA disappointed investors last week with a net profit increase of just 4% - $2.38 billion - and an even lower rise in EPS growth of just 2%. Those results, coupled with a $100 million pre-tax hit for CBA because of higher funding costs and its need to raise provisions for corporate bad debts by $138 million sent shares across the banking sector into their steepest one-day decline in 19 years last Wednesday.

St George shed almost 7% in value which took the shares down to $25.52. The stock staged a mini-recovery a day later, but lost it all again by Friday's close. It ended the week at $25.50, having hit an all-time high of around $38 just three months ago.

The share price fall represents the first major challenge for the bank's new management team, headed by recently-appointed chief executive Paul Fegan and finance director Michael Cameron. The stock has not had a negative year since 1997, but has lost 29.4% since September's financial year-end. -- With MARC MONCRIEF