Sydney - St George Bank, Australia's fifth-biggest lender, met expectations with a record first-half profit yesterday on strong loan growth and a booming wealth management business, and upgraded its full-year forecasts.
St George shares rose A64c to A$36.65.
Australian banks have benefited from 15 straight years of economicgrowth and three-decade-low unemployment, while a mandatory pension scheme and a four-year rally in the sharemarket have lifted the performance of their wealth management divisions.
But analysts expect bad loans to creep up after the central bank raised interest rate three times last year to curb inflation.
Cash profit in the six months ended March rose 14.7 per cent to A$568 million ($644 million), compared with A$495 million reported a year ago.
Ten analysts on average had forecast cash earnings of A$566 million. Cash profit is before one-off items and accounting treatment of derivatives.
"Our strong revenue momentum has underpinned a significant decline in expense to income ratio to an industry-leading 42.6 per cent," managing director Gail Kelly said.
St George raised its full-year 2007 earnings per share (EPS) growth target to between 11 and 12 per cent from 10 per cent and reiterated its fiscal 2008 EPS growth target of 10 per cent.
St George is highly exposed to the subdued New South Wales economy. More than half of its retail branches are in NSW, a state where it also sold about 60 per cent of its home loans last fiscal year.
The bank said the home loan growth of 10.2 per cent in the first half was impacted by NSW's sluggish economy. But the demand from the small and medium business segment grew by about 25 per cent.
Shares in St George have risen over 9 per cent so far in 2007, compared with an 8.7 per cent gain in the benchmark S&P/ASX 200 index in the same period.
Last week, ANZ Banking Group - Australia's third-biggest lender - reported a 12 per cent rise in its first-half cash profits.
Westpac, the fourth-biggest bank, is scheduled to report is first-half earnings tomorrow.
