MyState Financial is still on the hunt for takeover targets to further extend its reach. The Tasmanian-based banking group said yesterday that its strategy remains "to participate in [the] industry rationalisation of the ADI, trustee and wealth management space."The group is making progress with its takeover in early 2012 of The Rock Building Society, in Queensland.A shift in the funding profile of The Rock from wholesale liabilities to retail deposits helped MyState lift its group interest margin over the last year to 1.8 per cent, from 1.4 per cent. A lift in direct sales of home loans through The Rock's branch network also helped lift the margin.MyState said its underlying profit increased nine per cent to A$14.9 million. Statutory net profit increased 30 per cent to $14.6 million. The bad debt charge halved to $1.7 million.Return on equity for the half was 10.2 per cent, down from the full-year ROE of 11.1 per cent. John Gilbert, managing director of MyState, said the ROE level was "not high enough."One expense line that will rise is technology, with a decision to migrate the core banking system of MyState to the TCS BaNCS system recently being adopted by The Rock.MyState's profit in Tasmania fell $600,000 to $11.1 million. The Rock is back in profit, with a net profit of $1.5 million after a loss of $116,000 a year ago.The profit of Tasmanian Perpetual Trustees increased to $1.9 million, from 41.5 million. MyState set a budget of $6.3 million for this project.Gilbert said MyState "would like to participate in one way or another" in industry consolidation.He said the group had "no specific mutual targets. We have discussions with people in the industry from time to time that a [non-operating holding company] might be preferable to a merger with a larger mutual."Our preference is to get The Rock business model right. We are not aggressively pursuing [a takeover]."