THE asset quality of banks in China continued to deteriorate in the first three months of this year as bad loans rose for a sixth straight quarter amid a weak economic rebound in the world's second-biggest economy, the banking regulator said yesterday.

The non-performing loans added 33.6 billion yuan (US$5.4 billion) in the first quarter to 526.5 billion yuan at the end of March, while the NPL ratio rose to 0.96 percent from 0.95 percent at the end of last year, the China Banking Regulatory Commission said on its website.

Bad loans climbed across all types of lenders, while foreign lenders in China had the lowest NPL ratio at 0.59 percent at the end of March.

However, Deloitte Touche Tohmatsu said in a report that lenders in China have relatively low bad loan ratios because credit assets expanded at a faster pace than the rise in bad loans, which caused a "dilution effect" on the bad debts.

PricewaterhouseCoopers also pointed out in a recent report the possibility of a further increase in sour debts as overdue loans at China's top-five lenders surged this year.

The overdue loan, a critical indicator of asset quality, will become non-performing if the payment due exceeds 90 days.

The lenders' combined net profit totaled 368.8 billion yuan during the first quarter, up 13 percent from a year earlier.