Credit Union Australia has diversified its funding over the past year to reduce its reliance on high-cost retail deposits. In June it raised A$675 million through an issue of residential mortgage-backed securities (its first since 2010) and it has had an active certificate of deposit program.This wholesale funding activity allowed CUA to increase lending assets by 5.9 per cent in the year to June, while increasing retail deposits by 4.5 per cent. The proportion of funding from retail deposits is 75 per cent.It was assisted in its efforts by a ratings upgrade from Standard & Poor's last October. S&P raised CUA's long-term credit rating from BBB to BBB+."Our strategy has been to diversify our funding and we have invested in our treasury capability to achieve that," said CUA's chief executive, Chris Whitehead. Yesterday, the mutual reported a net profit of $57.5 million for the year to June - an increase of 12.7 per cent over the previous corresponding period. Interest revenue increased by 7.9 per cent, to $197.8 million.Whitehead said CUA has also been investing in its distribution network. It stopped selling loans through mortgage brokers during the financial crisis and only started doing so again a year ago."Manual processing was a constraint on broker sales, so we have been investing in online submissions and other services in the broker channel," Whitehead said.CUA suffered a setback earlier in the year when the Australian Securities and Investments Commission asked it to change the advertising of its Rate Breaker mortgage, so its terms and conditions were clearer to consumers. Whitehead said the mortgage, its flagship variable-rate product, was doing well considering it had missed out on advertising support for some of the year.The mutual is a few months behind with its core system upgrade. System conversion was scheduled for earlier this year, but the launch date will now be towards the end of the year. Whitehead said system development and testing was finished, and staff were presently being trained."It is a modern integrated system that will give us advantages in terms of the speed with which we can innovate and the flexibility we will have to change products. It will also enhance our digital and mobile capabilities," he said.