Adelaide Bank's new chief executive Jamie McPhee set a new direction for the bank yesterday when he said it would stop chasing market share in home lending and would seek more profitable home loan business.The home loan segment - once Adelaide Bank's traditional strength - will fade in importance for the bank as it pursues higher margin opportunities in a range of business lending segments that the bank believes are less sensitive to margin erosion.In recent years the bank has had an aggressive home loan strategy, with a compound annual growth rate of 25 per cent a year over the past three years. At one stage the bank articulated a goal of securing a five per cent share of the national residential mortgage market, though the actual market share was never much more than three per cent.Over the last five years the bank's margin, at a group level, has been cut in half - from close to two per cent in 2002 to just over one percent in the six months to December 2006. Most of that reflects the price cuts in the low documentation loan segment in which Adelaide Bank, an early mover, was able to charge a premium. Home lending, which remains the biggest contributor to the bank's earnings, was its big disappointment in the December half. Adelaide Bank yesterday reported cash earnings of $46.1 million for the six months to December, 10 per cent up on the previous corresponding period. Earnings per share increased by eight per cent.Underlying earnings increased by 16 per cent over the half to $82.2 million over the year before.Key profitability ratios fell. The bank said the return on equity fell to 14.7 per cent from 17.7 per cent and the return on assets fell to 0.36 per cent from 0.42 per cent. The profitability ratios, as calculated by the bank, take into account the $4.6 million retirement payment (after tax) to the former managing directorResidential lending contributed $22.6 million before tax to group profit. This was $9.5 million down on the previous corresponding period. Home lending growth of 13 per cent for the half was almost half the 22 per cent growth in home lending in the 2005/06 financial year. However, the level of approvals was up by 18 per cent, reflecting plenty of churn in the mortgage book.The contribution from residential mortgages to group earnings fell from 41 per cent in the half year to December 2005 to 27 per cent in the latest half.McPhee said of this trend: "We are no longer pursuing the market share we held in the past. We are aiming for a profitable home loan business."We have drawn a line in the sand, a price under which we will not write product. We want to see the business grow and we are not getting out of it, but we want it to be profitable "This change of direction was particularly noticeable in the low doc part of the mortgage portfolio. Low doc loans accounted for about