AMP Bank met its target for above-system growth in mortgages during the six months to June but said it would have to focus more on productivity and customer retention in a market characterised by "intensified" competition for mortgage sales.AMP Bank's operating profit increased by 11 per cent over the previous corresponding period to A$42 million, but was down 6.7 per cent on the previous half.Revenue was up 1.7 per cent over the previous corresponding period.The net interest margin fell from 1.39 per cent in the December half to 1.35 per cent in the six months to June.The cost to income ratio fell from 31.5 per cent to 30.6 per cent year-on-yearThe return on capital was 14.5 per cent for the June half - down from 15.4 per cent in the previous corresponding period.The mortgage book grew by 9.3 per cent to $13.9 billion over the 12 months to June. The total loan book grew by 9.5 per centThe bank said it achieved growth without compromising lending standards. The average loan-to-valuation ratio of the book remained steady at 67 per cent, arrears (90 days or more past due) rose from 37 basis points to 44 bps and the loan impairment expense rose from one basis point to two bps of gross loans and advances.Superannuation deposits were down 11.9 per cent year-on-year, while retail deposits were up 28 per cent. The proportion of customer deposits to total bank funding fell from 56 per cent in June last year to 54 per cent in the latest half.The bank's innovative Notice Account Saver, a hybrid product combining the features of an at-call and a term deposit account, grew to $400 million.The growth in lending during the June half was funded through a mix of a $1 billion residential mortgage-backed securities issue, retail deposits and $500 million of medium-term wholesale funding.