Suncorp acting chief executive, Chris Skilton, said yesterday that the competitive disadvantage being suffered by the group's banking operation as a result of the global financial crisis was getting worse, not better, and the bank had made the right decision to separate non-core businesses and put them in run-off.Banking made a $117 million contribution to Suncorp's pre-tax profit of $799 million. Group net profit was $348 million, down 40 per cent on the previous year. The bank contribution, 82 per cent down on the previous year, played a big part in the overall decline.Skilton said: "The Government guarantee has clearly provided good access to global liquidity and this mechanism is being widely used by all Australian banks."Unfortunately, for the regional banks, debt investors are differentiating between AAA rated Government guaranteed paper issued by major banks and AAA rated Government guaranteed paper issued by regionals such as ours.  "When coupled with the differentiated fee scale applied by the Government, this puts sub-AA rated issuers at a distinct disadvantage."This funding disadvantage will be compounded as AA banks raise non-guaranteed funding at lower all-up cost than guaranteed issuance, as they have done from domestic sources and, more recently, from offshore markets."This and our de-risking strategy had a significant impact on margins in the second half of 2009 and confirms why we can no longer be competitive in what we have defined as non-core segments."The $36.8 billion core portfolio is made up of housing finance, agribusiness, some leasing, some SME finance and consumer finance. Core banking made a pre-tax profit of $138 million in the June quarter.The $17.5 billion non-core portfolio includes corporate lending, development and property finance, and the balance of the leasing and SME books. Non-core banking made a loss of $139 million in the June quarter.The bank is still in the midst of its extensive restructure. Core lending is now funded 64 per cent by retail deposits and the bank is looking to get that higher. But that has not been easy. Retail deposits were up 13.2 per cent over the year, which was below system growth. The bank was hit by the "flight to quality" in the December half. Things picked up in the second half when deposits growth was above system.Loans and advances fell 1.3 per cent to $54.4 billion, due to the run-off in non-core businesses. In the core portfolio home loan receivables grew 3.9 per cent, which was below system. Skilton said the weak growth in home lending was due to the bank's decision to cut back on lending via the "indirect" channel.The bank's net interest margin fell from 1.79 per cent in June 2008 to 1.68 per cent at the end of last financial year. Higher wholesale funding costs were the biggest contributor to this change.The bank's result included $710 million of impairment charges, representing 128 basis points of gross loans, advances and other receivables. Impaired assets represents 2.7 per cent of gross loans and advances.The bulk of impairments came from the non-core portfolio. The core