St George Bank profit highlights 01 November 2007 5:45PM Databank, • Net profit for the year to September was $1.163 billion, an increase of 11 per cent over 2006. After adjusting for hedge fund accounting, cash profit was $1.160 billion, an increase of 13.1 per cent over the previous year.• Earnings per share rose 11.8 per cent from 195.8 to 218.9 cents. The final dividend was 86 cents a share, up 11.7 per cent.• Return on equity rose from 22.9 to 23.2 per cent but return on assets fell 1.05 to 1.04 per cent. Risk weighted assets increased by 19 per cent.• The expense to income ratio fell from 44 to 42.5 per cent.• The net interest margin contracted by 10 basis points from 2.11 to 2.01 per cent. The bank said it expects margin contraction to continue at a rate of about 10 basis points a year.• The retail banking division made the biggest contribution to overall earnings, at 46 per cent. The division's revenue was up nine per cent and profit before tax of $773 million was 10 per cent higher than the previous year.• Wealth management had the biggest pre-tax profit growth, up 21 percent. Pre-tax profit for institutional and business banking was up 15 per cent.• Credit quality was sound. Gross non-accruals to net receivables was seven basis points, compared to an average of 20 basis points for the major banks. • Specific provisions for bad and doubtful debts rose 28 per cent from $121 million to $155 million. Bad and doubtful debt expense as a percentage of average assets rose from 0.14 to 0.16 per cent.• The capital management program includes plans for an underwritten divided reinvestment plan that is expected to raise $458 million and a non-innovative tier one issue expected to raise $400 million.• APRA granted St George approval to manage the bank on a slightly lower core capital ratio of 6.5 per cent down from 6.7 per cent previously.