St George Bank has grown its retail deposit book by almost 19 per cent over the past year and in the process has been able to reduce its demand for funds from other sources.St George chief executive Paul Fegan told analysts at a market update yesterday that retail deposits, which stood at $55.3 billion at the end of July, rose at an annualised rate of 18.9 per cent over the 10 months to the end of July. Over four months the annualised rate is 24 per cent.The bank confirmed previous guidance that it would produce growth in earnings per share of around eight to 10 per cent for the year ending in September.Fegan said the bank had been able to attract deposits in a very competitive market without having to give away too much margin. Like other big banks St George says its net interest margin is declining by about 10 basis points a year over the long term.Allowing for the cost of deposits, the fall in net interest margin would be within that 10 point range for the 2008 financial year.The bank has been helped by the flight to quality in the retail investor market - investors pulling their money out of equities and parking it in cash accounts and term deposits. The same has occurred in the superannuation market and the bank's wealth management business Asgard has been another source of deposit growth.Until two years ago investors on the Asgard platform who wanted a cash portfolio option were given a choice of third party providers, such as Macquarie Cash Management Trust. Asgard added a St George wholesale cash option and the bank has picked up around $2 billion of deposits through the Asgard channel since then.As a result of deposit growth the bank's need for term funding in 2009 may be reduced. Chief financial officer Michael Cameron - in Picasso mode — said the bank was looking to raise $11 to $12 billion in term funding next financial year but may reduce that target to $10 billion if the deposit growth continues.The actual funding needs of St George Bank as an independent entity in 2009 are, more than likely, zero, given that St George will be a subsidiary of Westpac by then.St George's market briefing followed a similar briefing by Westpac on Friday. Like Westpac's, the core message of St George's management (given the context of the credit crunch and the deceleration in the rate of economic growth in Australia) was that the outlook was essentially fine. Fegan said the bank's sector-leading performance on cost to income was helping keep its funding costs down. The bank's cost to income ratio was 42.5 per cent 10 months ago and has come down to 40.5 per cent since then. Fegan said: "Our funding costs are higher than the majors but our low cost to income gives us an efficiency advantage. We are three percentage points ahead of the average cost to income of the majors and that gives us 20