The Australian banks’ safe haven status is increasingly coming under pressure amidst what only can be described as ongoing freezing temperatures on global debt and credit markets.

The latest victim could well be Australia’s fifth largest bank, St George (SGB), with analysis by Deutsche Bank analysts revealing management’s 10% EPS growth target for FY08 should now be considered under threat.

Analysis conducted by Deutsche Bank’s team of banking analysts suggests St George’s capital position is likely to fall below its APRA approved target of 6.7%. The impact of this would be that the bank may need to underwrite its dividend for this year. This would, on Deutsche Bank’s estimates, dilute St George’s forecast EPS for the year by an extra 1%. However, the analysts also believe this will undermine market confidence in the bank maintaining its current 77% payout ratio.

In a research note released this morning, Deutsche Bank analysts stated they have grown increasingly concerned about St George’s capital position in the second half of calendar 2007.

Deutsche Bank believes St George is likely to be forced to shelve a $3.5bn securitisation issue scheduled for September. In addition, and hot on the heels of similar announcements by ANZ Bank (ANZ) and National Australia Bank (NAB), St George is likely to be forced to move circa $1.3bn in conduit assets on its balance. The result of this, Deutsche Bank believes, is that St George’s tier one capital for the end of this month is likely to drop to 6.4%. This would be well below management’s 7-7.5% target range and also well below the APRA temporary 6.7% target.

The banking analysts believe there can be little doubt St George will be able to access securitisation markets again, but when? The current situation on global debt and credit markets doesn’t imply this moment will come anytime soon. Yesterday, the Reserve Bank of Australia (RBA) was forced to inject $3bn into the local banking system, which was $0.5bn more than what was apparently required by the banks.

Deutsche Bank believes the speed and the costs at which St George (and other banks we assume) will regain access to securitization markets again remains very uncertain. This does not take away that both factors are regarded as “critical” to St George’s capital and earnings outlook.

The analysts add St George’s near-term earnings outlook is not exactly helped by the recent spike in the cash/90 day bank bill spread to 55bps.

Last time we looked St George bank shares were trading 60c or 1.77%, lower at $33.34 in a generally poor day for bank stocks.

Deutsche Bank has for the time being left its Hold rating unchanged, as well as its earnings forecasts and $35 price target. The analysts forecasts are currently 1% below management’s 10% growth target for the year.