ANZ chief executive Shayne Elliott yesterday conceded that his bank might have overreacted to APRA's crackdown on lending standards by reining in lending to investment borrowers.The admission from the ANZ boss came after the bank revealed that its home loan portfolio grew by only 1 per cent in the 12 months to the end of December.While ANZ grew lending to owner-occupiers in calendar 2018 by more than 3.5 per cent or A$6.1 billion, the bank slashed the size of its investment mortgage book by almost 4 per cent or $3.2 billion.Elliott said the dramatic slowdown in home lending was due to lower system growth and policy changes implemented in the second half of last year."Consumer sentiment has remained generally subdued with uncertainty around regulation and house prices impacting confidence," he said."While we are maintaining our focus on the owner occupier segment, we acknowledge we may have been overly conservative in our implementation of some policy and process changes."We are also taking steps to prudently increase volumes in the investor space".Elliot's commentary on the bank's mortgage performance accompanied the release of the group's Pillar 3 update.The bank's decision to tighten lending activity probably contributed to a significant improvement in asset quality across all segments of the bank's credit book.Charges for bad debts were only $156 million in the December quarter - 24 per cent lower than the $202 million booked in the previous corresponding period.The level of past due loans rose by only one basis point, with Western Australia continuing to report the highest rate of non-performing loans.Slowing loan volumes also helped the bank to maintain its sector-leading position in terms of regulatory capital.At the end of December ANZ had a CET1 ratio of 11.3 per cent- well above the 10.5 per cent level required to meet APRA's "unquestionably strong" capital requirement.The ratio could improve to 11.6 per cent if the company's planned sale of its wealth management business to IOOF is completed at the end of the year.Several analysts told clients in research reports that they expect the bank to undertake further capital management programs.A CET 1 ratio of 11.6 per cent implies that the bank is sitting on more than $4 billion of surplus capital.