Deutsche see St George short on capital

Analysis by Deutsche Bank's equities research team argues that St George 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.

Deutsche anticipates that the bank will be both unable to free up capital through an otherwise routine jumbo securitisation (of in excess of $3 billion and bound to be deferred) and also through the need to fund an estimated $1.3 billion for asset-backed conduits.

Options include underwriting its dividend investment plan and cutting the payout ratio. The former would raise around $350 million in capital and restore the bank's capital ratio to 7.0 per cent. For this reason Deutsche argue St George may not reach its forecast growth in EPS of in excess of 10 per cent in the bank's 2008 financial year.