Five of country's top banks, including the world's largest bank Industrial and Commercial Bank of China (ICBC), posted declines in third-quarter profits though they recovered slightly from record profit dives in the second quarter.
China has brought in a series of policies to combat the impact of COVID-19 shutdowns on the economy, but as some forbearance measures are to expire senior bankers have already warned that soured debts would continue to emerge later this year and into next.
Guo Yi, an analyst with Wanlian Securities, said the degree of economic recovery will impact expectations for the asset quality of banks, with banks likely to see corporate loan repayment pressure peaking around mid-2021.
The government has guided banks to conduct a lending push to support the virus-hit economy and coming months will inevitably show how many of those loans prove to be of poor quality.
ICBC, the world's largest bank by assets, posted a 4.7% fall in third-quarter profit.
Following suit were Bank of Communications Co (BoCom), Bank of China Ltd (BoC) and Agricultural Bank of China Ltd (AgBank), all of which reported lower earnings.
China Construction Bank Corp (CCB) had also posted a fall over the same period on Thursday.
Lenders are likely to see less pronounced profit falls in the coming fourth quarter, but their performance will also be influenced by future policies and regulations, said Wang Yifeng, an analyst with Everbright Securities.
ICBC, CCB, BoC and AgBank all posted rising non-performing loan ratios, while BoCom said its soured debt ratio held steady.
During the height of the pandemic earlier this year, China had asked banks to delay pushing borrowers for repayments in an effort to ease cash flow woes.
Net interest margins, a key measure of profitability, varied across the board.
At BoCom, the margin rose but at the other lenders it either fell or held steady. AgBank didn't report the indicator for the last quarter.
($1 = 6.6866 Chinese yuan)
(Reporting by Cheng Leng and Zhang Yan in Beijing, with Engen Tham in Shanghai; Editing by Edwina Gibbs and David Holmes)