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Date Published : Monday, February 25, 2008
St George Bank has revealed that its finances are under pressure as a result of continued market volatility and higher funding costs associated with the global credit crunch.
The bank said its captive mortgage insurance business and its wealth management division had been adversely affected by problems in the wider banking sector.
It may have to mark down the value of investments contained within the portfolios of its captive mortgage insurance arm St George Insurance Australia, the Herald Sun reports.
The division has been a large contributor to St George's overall profits in recent years and there are concerns that any markdowns will have a negative impact on its first half results.
The bank has acknowledged that it is likely to suffer a hit on investments during the first half of the year because of the ongoing credit crisis and the problems it has created.
However it has defended the credit worthiness of its underlying mortgage book and insisted it is on track to meets earnings per share growth of ten per cent in the current financial year.
"In the current year, volatile investment markets are having an impact, but our underwriting business continues to perform in line with expectations and remains well capitalised," St George spokesman Jeremy Griffith said.
The profits of some other banks with mortgage insurance captives are expected to be undermined by the ongoing troubles in the banking sector.
Meanwhile, the chief executive of ANZ has warned that banks are likely to feel the pinch of the credit crunch for some time to come.
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