SYDNEY: St George Bank Ltd, Australia's fifth largest commercial bank, met forecasts with a 12% rise in first-half profit on stronger lending, but shares fell due to sluggish economic growth in its biggest state market.
The bank kept its 2006 and 2007 forecasts for 10% earnings growth.
“The result didn't really have any big surprise,” said Shaw Stockbroking analyst David McDonald.
However, the stock fell as much as 1.8% from a near-record level because some investors had hoped earnings would beat expectations, and due to concerns over economic growth in the bank's biggest state market of New South Wales.
McDonald said while St George's loan book was skewed toward residential lending, much bigger rivals such as Australia and New Zealand Banking Group Ltd and Westpac Banking Corp had more exposure to business lending, which was growing at the fastest rate in almost 17 years.
“Given there's not a great deal of confidence about where that housing cycle is going in the next six to 12 months, that's going to be overhanging the St George share price,” he said.
Net profit before one-off items climbed to A$502mil from A$449mil a year earlier. Analysts' average forecast was for a profit of A$503mil, according to brokerage reports. The range was A$484mil to A$517mil.
St George, which makes 68% of its gross lending to the residential sector, said it was well positioned to gain from the expected economic upturn in New South Wales in 2007.
“We deliberately want to be conservative there and make it clear that we are not pinning our near-term growth plans and targets on an early recovery in New South Wales,” chief financial officer Steve McKerihan told Reuters.
Shares in St George were down 1.7% at A$30.45 by 0318 GMT in a broader market that was 0.17% lower. – Reuters