Suncorp issued a warning yesterday that lending volumes in its banking business could be lower for the rest of the year. Like every other lender, Suncorp faces a challenge sourcing wholesale funds at a reasonable price that it can use to support its rapidly expanding loan book.The group's chief financial officer, Chris Skilton, said he had all but given up hope of doing an issue of residential mortgage backed securities this year and would have to rely instead on the corporate bond market to issue term debt.Skilton said he was also working on plans to issue tier one and tier two capital during the year to bulk up the balance sheet. In the short term the financier will raise capital equal to 65 per cent of the dividend it plans to pay out this half which will raise about $315 million.Speaking at the release of the group's financial results for the six months to December Skilton said: "There may be lower volume growth. We will be looking for quality credits and appropriate pricing."The group's banking division does not have the funding resources to maintain the strong volume growth it enjoyed in the December half, when home lending growth of 12.9 per cent was above system, business lending was up 28 per cent and consumer lending was up 32 per cent.Suncorp's corporate loan book, a newer line of business, was up 62 per cent over 12 months.Customer deposits were up a very healthy 27 per cent but the proportion of retail funding to total funding fell from 49 to 43 per cent. Suncorp's banking division reported pre-tax profit of  $307 million, up 6.2 on the previous corresponding period.  Without the bad debt increase, the pre-tax profit would have been 9.9 per cent higher.Revenue was up 7.4 per cent to $568 million and operating expenses were up 4.3 per cent to $245 million. The cost to income ratio was 43.1 per cent. The net interest margin dropped 27 basis points to 1.76 per cent, largely reflecting the change in asset mix (greater reliance on higher cost wholesale funding) and the fact that Suncorp, along with most other banks,  waited until January before passing some of the higher funding costs on to home loan borrowers. Skilton said:  "Will the industry pass on the higher cost of term debt funding? It would be our intention to do so."I see margin compression abating as repricing takes effect."