BANKS in Shanghai maintained better asset quality compared to their peers across the nation, as the amount of bad loans contracted last month, the China Banking Regulatory Commission's Shanghai Office said yesterday.

Shanghai lenders' outstanding non-performing loans (NPLs) fell by 1.6 billion yuan (US$259.2 million) in June from a month earlier, to stand at 35.9 billion yuan. Meanwhile, the NPL ratio dipped 0.05 percentage points during the same period to 0.83 percent, which is below the national average, the local banking regulator said in its statement.

According to the top banking regulator, the average bad-loan ratio of all lenders in China was 0.96 percent by the end of March. And the ratio may have edged up to around 1 percent by the end of June, Sheng Laiyun, spokesman for the National Bureau of Statistics, said earlier this week.

Lenders' heavy reliance on cheap funding in the interbank market is believed to have spawned financial risks for the whole system after China's money market rates soared to record highs at the end of last month.

Total assets at banks in Shanghai rose 6.2 percent from a year earlier to 9.29 trillion yuan by June-end.