St George manages EPS growth not volume growth

St George Bank expects to report growth in home loan assets and retail deposits below the rate of system growth for the year to September 2007.

In a presentation lodged with the ASX and prepared for a Merrill Lynch investment conference in New York overnight the bank.  Chief financial officer Michael Cameron was due to speak at the conference.

The bank said it was targeting growth in home loans at around 10 per cent to 12 per cent  over the 2007 year (and which finishes in three weeks). This compares with the bank's forecast for system credit growth of 12 per cent to 13 per cent. The bank said it recorded annualised growth in home loans of 10.7 per cent in the 10 months to July 2007.

In deposits the bank said "volumes [are] managed with [a] focus on profitable growth". The bank said it recorded growth in deposits of eight per cent annualised in the first half of 2007 but did not provide a more up to date estimate.

The presentation slides state that "liquidity in the bank is strong with significant flexibility going forward", note that 45 per cent of funding is from retail deposits, that securitisation accounts for 16 per cent of funding and states that the bank "does not participate in sub-prime lending".

The bank said expected earnings per share growth of between 11 per cent and 12 per cent in in the bank's September 2007 financial year. He said the bank expects EPS growth of 10 per cent in 2008.

The EPS forecasts are, Cameron said, exclusive of the "impact of hedging and derivatives".

Given the restatement of the EPS forecasts St George management may be rejected an analysis published last week by Deutsche Bank that argued the bank's capital ratios may fall below its APRA approved target of 6.7 per cent, to as low as 6.4 per cent, by the end of this month (and the end of the bank's financial year) and that as a result the bank will have to raise fresh capital.