Dragon Pushing On With Growth

Sydney Morning Herald

Monday August 4, 2008

Danny John

ST GEORGE BANK is to push ahead with its plans to expand into Victoria and Queensland as it prepares to test the boundaries that will surround its operations if the proposed $15.5 billion merger with Westpac goes ahead.

While the country's fifth-largest bank is now four months away from the all-important shareholder vote on the merger, St George remains focused on the three-year growth strategy it embarked on just before its chief executive Gail Kelly left for Westpac last August.

With her successor, Paul Fegan, insisting that the bank should not be diverted from running its own race before the expected merger in November, St George is continuing to target its Big Four competitors outside NSW.

Its 200 NSW branches put it on a par with its rivals, while it is the biggest bank in South Australia through its Bank SA subsidiary, which has 109 outlets.

But Victoria and Queensland represent the group's biggest opportunities for growth - reconfirmed by its new retail banking boss, Les Matheson, following his tour of all states and territories bar Tasmania.

His appointment was announced a month before news of the merger was made public.

In an interview with the Herald, the former chief executive of Citibank Australia shied away from talking about his potentially short-lived career at St George or his post-merger prospects of continuing to run its 400-branch retail network under Ms Kelly's operational plans. Westpac intends to run St George as a separate retail bank alongside its own network.

Mr Matheson said his priority was to expand the bank's reach into Victoria and Queensland. Both offered some of the best options for boosting his division's share of group profits. Last year the retail division accounted for 46 per cent of St George's net earnings of $1.16 billion. The bank has previously forecast that its cash earnings will grow by 8 to 10 per cent this year.

Victoria has 39 branches; Queensland will soon have 33, although it has witnessed the fastest expansion of the two.

Mr Matheson is now targeting the metropolitan areas of Victoria, and those parts of Queensland where the population is increasing. "There are certain growth corridors in Victoria which would really suit what we offer," he said.

St George is also concentrating on its face-to-face business by converting automated branches to full-service outlets, while the number of ATMs had almost doubled in Victoria and Queensland.

The bank's planned growth is taking place alongside a rapidly slowing economy; albeit the impact on its loan book appears minimal, its latest data says.

"We have consistently reported that our arrears remain very healthy and that we are not seeing any deterioration," Mr Matheson said.

Contrary to the widely held view that NSW was the laggard of the states, he said its economy was not far behind Victoria's or Queensland's.

As for the national picture, he remained optimistic that the country would avoid a slowdown.