Suncorp's banking division was one of the strong performers in the mortgage market during the December half-year. Its mortgage book grew 5.9 per cent, putting it ahead of most other lenders. Business lending increased 4.7 per cent.Suncorp's chief executive Patrick Snowball said this was evidence that the bank had established itself as a genuine alternative to the major banks.Suncorp's chief financial officer, John Nesbitt, said the strong home loan growth was achieved by expanding the branch network in New South Wales and Western Australia and by focusing more on distribution through brokers.Over the past three years the bank has increased its loan portfolio by 25 per cent. It has done this while keeping its cost-to-income ratio flat and improving its credit quality. Its cost-to-income ratio was 52.7 per cent in the latest half, compared with 51.7 per cent in the previous corresponding period.Suncorp chief executive, Patrick Snowball, said he was keen to see a "step change" in banking costs. Speaking at an analysts' briefing yesterday, he said: "One lever that is not moving the way we'd like it at the moment is the cost to income ratio. We'd like to see it a bit lower. The step change will come as we introduce the new banking system. We'll be talking about that in May."The ratio of home loans past due (90 days or more) to gross loans fell from 72 basis points in December 2011 to 51 basis points in the latest half. The value of impaired assets fell 8.7 per cent.Less impressive was the net interest margin, which fell from 1.92 per cent, in December 2011, to 1.9 per cent last June, and then to 1.83 per cent in December. The bank said the margin was within its target range of 1.75 per cent to 1.85 per cent.Nesbitt said: "Recent changes to the Reserve Bank's cash rate and volatility in the cost of short-term hedging has had an adverse impact on the net interest margin over the half."Net interest income was up 6.6 per cent on the previous corresponding period.At-call deposits increased by 10.5 per cent and term deposits by 1.1 per cent. Other sources of funding included a A$600 million covered bond issue and $1 billion of residential mortgage-backed securities.Core banking contributed a net profit of $144 million to Suncorp's group earnings during the six months to December. The core banking profit was down 7.7 per cent on the previous corresponding period but up 8.3 per cent on the June half last year.The non-core banking business, a portfolio of impaired commercial and property loans that were put into run-off in 2009, made a loss of $140 million in the December half. This compares with a loss of $54 million in the previous corresponding period, and a loss of $209 million in the June half.Of the $18 billion of loans placed in the non-core bank in 2009 only $3.4 billion remains. The bank expects to have that balance down below $2.7 billion by June 30.There was some concern expressed