The mortgage market is an "abattoir", according to Bank of Queensland chief executive Stuart Grimshaw, who said BOQ would compete for home loan business but not match the more aggressive players in the market.Speaking at the release of the bank's interim results on Friday, Grimshaw said: "Pricing on variable rates is around 4.5 per cent, there are cash offers of up to $1250 and lenders are waiving LMI over 85 per cent."On residential development projects lenders used to require 100 per cent pre-sale. That is now 50 per cent"Grimshaw said mortgages were "expensive" for BOQ, adding that the bank was adversely affected by regulatory arbitrage - a reference to the fact that the big banks have a lower risk weighting for capital allocation on mortgages.During the six months to February the bank's retail loan book was flat, at A$26.2 billion.Grimshaw said the bank would not compete on price but it did expect to achieve growth in mortgages in the second half because of an expansion of its distribution network.It is selling more loans through brokers, has upgraded its digital platform and has started using mobile lenders. "There are all tried and tested paths to new business but they are new channels for us," he said.BOQ is also aiming for higher growth in business banking. Its commercial loan book grew from $5.2 billion to $5.3 billion over the six months to February.Grimshaw said: "We are scratching the surface in business banking. The margins are still good. We have employed more business bankers and we have made a commitment to do only high quality business."BOQ made a net profit of $134.7 million for the half - up 34 per cent on the previous corresponding period. On a cash basis, profit was up 17 per cent to $140.2 million.Grimshaw said the bank had maintained good cost discipline. The cost to income ratio was 43.8 per cent - down from 44.7 per cent in the previous corresponding period.The net interest margin increased from 1.66 per cent to 1.77 per cent. This was largely a result of a change in the deposit mix, with less reliance on high-cost term deposits and online accounts.The charge for bad and doubtful debts was $46.1 million - down 22.5 per cent on the previous corresponding period. The impairment charge represented 26 basis points of gross loans, in line with the industry average.In 2012 the bad debt charge was 194 bps of gross loans.The return on equity was 10.3 per cent - the first time the bank has had a double-digit ROE since 2009.