St. George Bank. Profits and Perspectives.


St, George Bank generates large profits from the fees collected from their clients. The banks are able to survive with the interest earnings generated from bank borrowings. There are many sectors affected by the increase in the bank’s profits. The following paragraphs will explain the differences in the effects of the financial statements and the creditors, consumers, suppliers and government.


Four Broad Stakeholders Groups

There are many stakeholders of St. George Bank are the bank. The stockholders invest money in order to received dividend income. They can earn money from the fluctuations in the stock market. A good example is the proper management response to the implementation of the new Australian Gold tax. Also, the consumers pay interest for borrowing bank money. The members of the Australian Consumers’ Association were against the high interest rates. The government has to step creates the laws to ensure a viable business environment that is fair to all parties. Katherine Lane, the solicitor general of Consumer Credit Legal Centre NSW stated that the normal free competition environment had broken down3. Lastly, the bank’s creditors supply goods and services in exchange for cash.

Conflict of Interests

The discussions show that the interests of the four stakeholders conflict with each other. An increase in profits will generate increases in stockholders’ dividends. On the other hand, the consumers’ conflicting interest is pay lower bank interest as possible in order to save on expenses. The government’s conflicting interest is to ensure a viable business climate for all parties in a business transaction. The creditors’ conflicting interest is to collect payments on time. Definitely, the discussion above shows that the interests of the four stakeholders conflict with each other.

How the opportunistic perspective of positive accounting theory would predict such publicity would influence the accounting policies of St. George Bank Limited

The opportunistic perspective of positive accounting theory would predict that such publicity would influence the accounting policies of St. George Bank Limited. Positive accounting theory states that accounting policies are influenced by the forces of economics, the stock market prices and others. The managers could decide which accounting principle they would implement in order to increase the company’s profits. The study of positive accounting theory is not about how the company performs but how the accountants think as the best way to record daily business transactions in order to present the highest profits for the company. In fact, some accountants even go overboard when they window -dress the financial statements.

Further, this violates Australian Accounting Standards as well as international financial reporting standards. This practice includes postponing accrued expenses to a later date in order to increase profits. Some accountants would use the accounting numbers in debt contracts in order to come up with an accounting policy that would favor the company. In fact, many accountants would consider the amount involved in debt instruments as a basis for the preparation of financial statements. For, managers of companies will use the accounting numbers as a basis for their decision making activities. The accounting numbers are used by the St. George Bank as evidence for charging their clients high interest rates when they apply for bank loans. The companies today are focusing all their scarce resources to reduce cost whenever and wherever possible. The company would reduce electricity costs to increase profits.

Using the 2007 annual report discuss if there is any evidence to support these prediction(s)

There are many evidences to prove that St. George Bank uses opportunistic perspective in implementing the positive accounting theory as discussed in the prior paragraph. Mr. Fegan stated in its September 2007 annual financial report that “St. George continues to reap the benefits of an exceptionally strong franchise – a well diversified bank and outperforming business banking and wealth business, with many more growth opportunities.”

His personal message to the stakeholders in the company shows that the entire drive of the business is to use all ways and means to present as much profit for the company as possible. The September, 2007 income statement shows a decline in the bank’s cost to income ratio as compared to the industry with a lead of 42.5%.This is the pure opportunistic perspective of the positive accounting theory. Likewise, the same quote above also states that the company’s ultimate aim is to increase revenues whenever and wherever possible. St.George’s revenues had grown by a robust 10.8%. Its list of bad credit clients was also favorably at.16%. The Chairman’s message is on page 2 of the September, 2007 Financial statements.

Discussion of countervailing predictions of the opportunistic perspective of positive accounting theory in relation to St. George Bank Limited

The countervailing predictions of the opportunistic perspective of positive accounting theory in relation to St. George Bank Ltd includes the government intervention and the a lobby of the bank’s consumer groups for all sides to unite in order in order to force the bank to reduce its interest rates. The bank will surely succumb to the pressures of both these broad stakeholder groups to reduce their profits. The bank would surely meet its detractors half way in order to maintain its clients and not get the ire of government officials.

How legitimacy theory would predict St. George Bank Limited would respond to such publicity

The legitimacy theory will help predict St. George Bank Ltd to respond to such publicity by stating that the bank will obey all social responsibility statutes. The bank must legitimately generate its profits. The company must exercise all its powers in order to comply with its social responsibility to obey all laws of the land especially environmental statutes. The stockholders would be happy if the company generates profits. For, the stockholders will be able to recover their investments through distribution of net profits using the dividend – payout method.

Likewise, the customers, the creditors and the government would prefer that the company generates profits so that it can continue to service their loan requirements. The government would like the bank to generate profits so that they can continue to serve the public in the areas of housing, car, business, and others.

Further, the community would surely be happy to know that the bank will hire its residents as bank workers. The Environmental groups would also be interested to know if the bank tows the line in terms of complying with environmental laws. The community wants to know how the bank throws away its thrash and the like. In short, the legitimacy theory will help predict St. George Bank Ltd to respond to such publicity because the company must legitimize its operations with the implementation of all its social responsibilities and the law.

The 2007 annual report and other sources shows evidence supporting these prediction(s).

The managers of the bank would legitimize that their interest rates complies with its social responsibility to all its stakeholders. The group’s financial results have complied with its Australian IFRS social responsibility. Compliance with statutes resulted to the higher level of profit volatility. The bank applied fair market values in presenting its derivatives and other financial instruments. Compliance with AIFRS resulted to the bank’s ineffectiveness in terms of hedge accounting. Compliance will ensure predictability. The predictability shows that the bank’s interest revenue is increasing. The interest income data shows that interest income increased from 2004 to 2007.


The financial statements of St. George Bank Ltd are legitimately prepared in accordance with Australian Accounting Standards, the Corporation Act of 2001 and the Banking Act of 1959. The IFRS is the backbone of the current Australian Accounting Standards. Conclusively, the fees feed huge bank profit jump.

Works Cited

Cabalu, Helen. 1998. The Road to Reform: Essays on Australian Economic Policy. Economic Record 74, no. 227: 415+.

Collett, Peter H., Jayne M. Godfrey, and Sue L. Hrasky. 2001. International Harmonization: Cautions from the Australian Experience. Accounting Horizons 15, no. 2: 171.

Milgate, Michael A. 2004. Transforming Corporate Performance: Measuring and Managing the Drivers of Business Success. Westport, CT: Praeger.

Zeff, Stephen A. 2002. “Political” Lobbying on Proposed Standards: A Challenge to the IASB. Accounting Horizons 16, no. 1: 43+.

St.George Bank, 2008. Web.

Deegan, C., Australian Financial Accounting 5th Edition, Sydney: McGraw-Hill, 2007.

Australian Accounting Standards, 2008. Web.

Kaye, B., Fees Feed Huge Bank Profit Jump, 2006.

Monem, R., Earnings Management in Response to the Introductions of the Australian Gold Tax, Watts, R., Zimmerman, J., Positive Accounting Theory: A Ten Year Perspective, Vol 65, No. 1, pp. 131 -156, 1990.

Businessspectator. 2008. Web.