St George Exposed To The Wobblies

Sydney Morning Herald

Friday February 22, 2008

Danny John

ST GEORGE BANK has nearly $600 million of outstanding loans to the three most high-profile of the financially stricken ASX-listed investments groups but expects to recover almost all of the money, investors were told yesterday.

The bank is a significant lender to offshoots of the Centro Property Group but not the troubled main parent. It has extended loans totalling $458 million which are fully secured by first mortgages over some of Centro's shopping centres in Australia and New Zealand.

St George also has $60 million as part of an $850 million unsecured syndicated loan provided by banks to the troubled Allco Finance Group.

The final chunk consists of two separate lines of debt to the MFS Group, including a margin loan of $25 million secured against the company's shares, at present suspended.

That loan is the one most at risk and its repayment is dependent on asset sales and a rescue plan now being drawn up by MFS to reduce its large debts.

However, St George is confident enough about the entire $580 million of borrowings not to have made any writedowns or specific provisions to cover the possibility of them going bad.

The disclosures came as the bank yesterday re-affirmed that it was on track to turn in a 10 per cent increase in earnings per share for the current year, although it cautioned investors about the effect of market volatility on its investment portfolio and wealth management division.

St George issued the update as part of an offer of $110 million worth of stock to retail shareholders, price to be calculated over the next five trading days.

© 2008 Sydney Morning Herald

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