The latest PricewaterhouseCoopers report shows that while China's top 10 listed banks for 2013 showed steady growth, non-performing loans could pose challenges in 2014.

A new report by PricewaterhouseCoopers says that while China's top ten listed banks for 2013 are operating smoothly and expanding their assets and liabilities, increases in non-performing loan balances and ratios are being observed across the board.

In the Analysis of China's Top 10 Listed Banks Results for 2013 report, the top 10 listed banks recorded total assets of RMB86.92 trillion ($13.9 trillion) in 2013, up 10.46 per cent from the end of 2012. Net profits posted in 2013 grew 12.64 per cent year-on-year to RMB1.09 trillion, although this rate was down by 3.77 per cent compared to 2012. For most of the banks, return on average assets remained unchanged, while the weighted average return on equity fell. 

The top listed banks are Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China, Bank of China, Bank of Communications, China Merchants Bank, Shanghai Pudong Development Bank, Industrial Bank Corporation, China CITIC Bank and China Minsheng Banking Corporation.

The health of the Chinese financial sector - and concerns about what has been dubbed the "shadow banking" area, have been cited by analysts in recent months as a reason for some wariness about the Asian country's economy. Goldman Sachs has told this country that it attaches a high probability to the risk of a major financial crisis in China in the next few years.

Total investments stood at RMB17.59 trillion at the end of 2013, with year-on-year growth accelerating to around 17.75 per cent. Out of these banks, five large joint-stock commercial banks increased their investments in trust beneficiary rights and asset management plans, resulting in an increase in the proportion of these assets relative to total investments held. The balances of these asset classes increased by 148 per cent in 2013, compared to 2012. 

However, starting from 2011, the average delinquency ratio and average NPL ratio began to exhibit divergent trends and the gap between the two further widened, said the report. While the banks achieved a total interest income of RMB3.69 trillion, its 9.06 per cent rate represented a sharp slowdown from the 20.23 per cent rate experienced from 2011 to 2012.

PwC noted that out of all business segments, only the investment segment showed an increase in growth, while all the others slowed down. This decline was most obvious for interbank placements and customer loans. 

"In 2014, the banking sector will continue to face a complex financial environment. As financial reform further deepens, commercial banks will confront challenges alongside opportunities. Banks should focus on the impacts of interest rate liberalisation, Internet finance, deposit insurance, and the entrance of privately-owned banks," said Raymond Yung, PwC China financial services leader.

"Going forward, as participants in the financial markets become more diverse and as innovative products continue to debut, the competitive landscape might experience change. It is only through strengthening risk management as well as actively and flexibly adapting to market needs that commercial banks can stand out amid these myriad changes and achieve stable growth," he concluded.