1 November 2001
St George Bank has joined the major banks in finally writing down a string of investments made during last year's Internet boom and will take a $58million pre-tax charge against its profit due out next week.
Taking the brunt of the writedowns is WealthPoint, the separately listed, online financial services operation whose core businesses were purchased from St George last year before the regional bank decided to privatise the company.
The writedown relating to WealthPoint is $22million, valuing the investment at 86c a share.
Excluding WealthPoint, St George has previously claimed it had invested no more than $100million in Internet ventures.
But the hit against the bank of $46million after tax, in total, is bigger than that which will be taken by the NAB next week, and those taken earlier this year by Westpac and ANZ in the wake of a collapse in the business model and market valuations of many Internet companies.
St George's investment in the former Sausage Software (now SMS Management & Technology) has been cut by $6million to $2million and will be sold over time. Investments such as Ctel, Autobytel, Virtual Communities, Netxsurance, Stockford and Marketboomer have been cut by $30 million collectively and will be held for now.
The bank's chief financial officer, Steve McKerihan, said the bank still expected a higher dividend than the 31c paid at the interim, because the payout would be based on cash profits.
``We did not want the market to be concerned about the dividend," he said.
Some forecasts, prior to last night's announcement, were for the bank to produce a net profit next Wednesday of $440 millionbefore preference dividends and an ordinary share final dividend of 34c.
St George moved to address the capital pressures caused by the WealthPoint acquisition, which transfers $130million of goodwill to the bank's balance sheet.
The bank has freed up $1.5million through securitising home loans in September, and revised the dividend reinvestment plan to reintroduce a 2.5per cent discount to the market price for those shares issued. The plan will also be underwritten by Credit Suisse First Boston to ensure the bank raises at least $120million to bolster its balance sheet.
The bank now expects to exceed the forecast $120million in pre-tax savings and benefits from the just-completed Best Bank program. Best Bank saw St George reduce full-time positions by about 1,000, restructure its branch network and implement a number of measures to improve efficiency at all levels.
There is speculation that AMP could buy St George's Sealcorp division, enabling St George to fund a tilt at BankWest.
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