AFR 30 May 13 The Annual Stockbrokers Conference, Sydney. Brian Hartzer, Westpac . Pic by Sasha Woolley

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Westpac's Australian business chief Brian Hartzer. Photo: Sasha Woolley

Westpac's Australian boss Brian Hartzer has played down suggestions the bank may be forced to cut its standard variable mortgage rate, as it seeks to accelerate growth in its flagship home lending business.

In an investor update on Friday, the bank said it planned to step up it efforts to win more customers in home lending, where its $333 billion loan book is second largest behind the Commonwealth Bank.

While Westpac has been gaining on rivals in recent months, its home lending is still expanding at a slower pace than the industry average, and Mr Hartzer said the bank had more work to do.

But he signalled it would not come at the expense of profit margins, and the bank would not ''bribe'' customers with cheap headline mortgage rates.

''If we build our business on the basis of bribing people to bank with us through price competition that is not going to give us the sustainable franchise that we want,'' said Mr Hartzer, chief executive of Westpac's Australian Financial Services division.

Westpac's standard variable rate of 5.98 per cent is the highest of the big four, a position it has held for several years, sparking analyst predictions it may need to cut rates to reignite growth.

But Mr Hartzer said the standard variable rate was only one part of the equation, and it often received more attention than its deserved.

''Of course pricing is an element of the mix and as we've said we will be competitive where we need to do it, but there's a lot more involved in running this business well for the long term than the SVR,'' he said.

Alongside price, Mr Hartzer said the bank was increasing customer numbers through initiatives such as improvements in service and technology.

Amid intense competition in the mortgage market, average discounts on new home loans have also risen by about 10 basis points at the top end of the market.

While Westpac does not provide quarterly profit figures like its rivals, Mr Hartzer said mortgages had picked up ''significantly,'' with new home loans approvals rising 30 per cent in the last year.

The result has partly been driven by a stronger property market boosted by cheap credit, but Westpac has in recent months also narrowed the gap between its loan growth rate and that of rivals.

Alongside mortgages, the bank has also expanded in the credit card market 1.5 times faster than the industry over the last year.

Westpac's pursuit of quicker growth in mortgages marks a significant change in strategy that has occurred over the last year.

It has moved from focusing heavily on strengthening its balance sheet by chasing customer deposits to putting a higher priority on loan growth.

''Last year we were in a low growth environment with falling interest rates, and we set our approach very much around managing the balance sheet and managing our margin,'' Mr Hartzer said.

''We now think we are in a different mindset so we are beginning to ramp up our efforts on growing in mortgages.''

Alongside increased lending, another key factor behind recent profit growth in banking has been falling bad debts.

Mr Hartzer signalled  the trend had continued, but cautioned that bad debts would eventually rise again.