The non-performing loan ratio of Chinese commercial banks increased slightly by 1 basis point quarter-on-quarter to 1.76 percent as of the end of September, the China Banking Regulatory Commission announced on Thursday.

During the same period, the NPL balance of commercial banks reached 1.49 trillion yuan ($219 billion), up 3.94 percent from the end of the previous quarter. The balance of special-mention loans, which refer to loans that are overdue but which banks don't yet consider impaired, continued to rise by 6.06 percent quarter-on-quarter to 3.5 trillion yuan.

"We estimate that the growth of NPLs will slow down, although NPL ratios will still increase slightly year-on-year," said Zhang Xingrong, head of banking research at Bank of China's Institute of International Finance, earlier this month.

In preparation to handle potential risks triggered by bad loans, the balance of allowance for impairment losses on loans of commercial banks went up 3.68 percent from the second quarter to 2.62 trillion yuan, although the ratio of allowance for loan impairment losses to non-performing loans dropped 44 basis points to 175.52 percent.

The increase in allowance for impairment losses on loans, combined with China's interest rate liberalization and economic restructuring, caused a slowdown in profit growth for commercial banks. Their year-on-year profit growth fell 34 basis points from the previous quarter to 2.83 percent as of the end of the third quarter.

Zeng Gang, director of banking research at the Institute of Finance and Banking under the Chinese Academy of Social Sciences, said, "The profit growth of most Chinese banks has fallen to single digit levels and will even turn negative, truly reflecting the current state of the real economy."

He said banks will make stronger efforts to increase their income from intermediary businesses including investment banking, wealth management and asset custody.