St George Fires Up Expansion Plans

The Age

Monday August 4, 2008

Danny John

ST GEORGE Bank is to push ahead with its expansion plans in Victoria and Queensland as it prepares to test the self-autonomous boundaries that will surround its operations if its $15.5 billion merger with Westpac goes ahead as proposed.

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

With successor Paul Fegan insisting that the bank should not be diverted from running its own race before an anticipated successful conclusion of the transaction in November, the bank continues to target the Big Four outside NSW.

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

But Victoria and Queensland are the biggest opportunities for growth, a blueprint that has been reconfirmed by new retail banking boss Les Matheson, who arrived from Citigroup in June.

Mr Matheson's appointment was announced just a month before the St George-Westpac merger was made public.

In an interview with BusinessDay, the former chief executive of Citibank Australia shied away from talking about his post-merger prospects of running the bank's 400-branch network under Ms Kelly's multi-brand operational plan.

But Mr Matheson said his immediate priority was to expand the bank's reach into the two states. The retail division is by far the biggest contributor to group profits and last year accounted for 46% of St George's net earnings of $1.16 billion. The bank has previously forecast that it will increase its cash earnings by 8% to 10% in 2008.

Victoria has 39 branches and Queensland will soon have 33. Mr Matheson is now targeting metropolitan areas of Victoria, in particular, and parts of Queensland where the population is rising.

St George is also concentrating on its face-to-face business by converting automated banking branches in the state to full-service outlets.

The planned growth takes place against the backdrop of a slowing economy, although the impact on its loan book appears minimal. "We have consistently reported that our arrears remain very healthy and that we are not seeing any deterioration," said Mr Matheson.

He is cautiously optimistic that the country will avoid a major slowdown.

"I think the current uncertain conditions will last for 18 months to two years as the fall-out from the financial trauma takes time to play out," he said.

KEY POINTS

- The bank is proceeding with its growth blueprint for Victoria and Queensland.

- This is despite the proposed Westpac merger, which shareholders vote on in November.