Westpac suffered a decline in both net interest income and non-interest income in the March 2011 half. Like ANZ, it was hit by the slowdown in the demand for credit. The bank reported yesterday that net interest income, of A$5.8 billion for the six months to March, was virtually unchanged from the previous half and down three per cent on the previous corresponding period.Non-interest income of $2.5 billion was unchanged from the previous half and down three per cent on the previous corresponding period.None of the bank's divisions were able to produce strong growth in operating income.The result was saved by a 47 per cent reduction in the bad debt charge - down from $879 million in March last year to $463 million in the latest half.The bank reported net profit of $3.9 billion for the half, which was up 37 per cent on the $2.9 billion profit in March last year. Return on equity rose from 18.8 per cent in the September half to 20.6 per cent in the latest half. This makes Westpac the most profitable of the big banks in Australia.Expense-to-income ratio fell from 44.7 per cent in the September half to 43.8 per cent in the latest half.The bank's $295 billion Australian home loan book, which makes up 60 per cent of total loans, grew by six per cent over the previous corresponding period. Growth was below system.The bank's chief executive, Gail Kelly, said Westpac's lending was above market growth rates but St George was well below system.The group has adopted a strategy of shifting loan origination away from brokers to proprietary channels. As a result, St George lost sales in non-core geographies (areas where it does not have branches).The group fell behind system in credit card balances and its retail deposit flow came to a virtual standstill in the half.Kelly said the slowdown in deposit flow was the result of a decision to change the profile of the book - re-pricing to discourage hot money and putting the business on a more sustainable footing with a better margin for the bank.Despite these efforts to improve margins, the bank's net interest margin fell from 2.26 per cent in the March half last year to 2.17 per cent in the September half, before moving back to 2.21 per cent in the latest half.