Suncorp Bank has "dialled back" mortgage lending in cases where the loan-to-valuation ratio is above 90 per cent. The focus of the bank's mortgage underwriting has shifted to loans with LVRs below 80 per cent.Suncorp Bank chief executive John Nesbitt told analysts at a briefing yesterday that "a more conservative approach to credit risk selection" was appropriate, given that interest rates are likely to rise.Suncorp's announcement comes just a day after Australian Prudential Regulation Authority chairman John Laker said the regulator was seeing increasing evidence of mortgage lending with higher risk characteristics and warned it did not want the trend to continue.Nesbitt said the decision would come at the cost of some market share. APRA figures show Suncorp's mortgage portfolio growing at 1.1 per cent during the March quarter, compared with system growth of 1.4 per cent over the same period.The bank's consumer loan portfolio reduced by 1.3 per cent during the March quarter.Nesbitt said the bank continued to run off its non-core commercial loan portfolio. This change, combined with improved deposit pricing and lower pricing in wholesale funding markets, has contributed to an improvement in the bank's net interest margin, which is currently within the target range of 1.75 per cent to 1.85 per cent.Offsetting these improvements, the bank's bad debt charge rose in the March quarter. Impairment losses in the quarter represented 24 basis points of gross loans and acceptances, which is above the bank's target range of 10 bps to 20 bps.Impaired loans are also up, with one agribusiness loan and two commercial exposures worth a total of $78 million moving into the impaired category.Nesbitt said the prolonged drought in North Queensland was having an impact on the bank's "small but important" agribusiness portfolio. The bank will add to its provision overlay in the fourth quarter.