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BEIJING (Reuters) -Chinese commercial banks' net profit growth is on a downward trend mainly due to a decline in interest rates on loans and narrowing net interest margins, a National Financial Regulatory Administration (NFRA) official said on Wednesday.
The average interest rate on new issued corporate loans in the first seven months this year fell by 39 basis points compared to the same period last year, Liao Yuanyuan, director of the Statistics and Risk Surveillance Department at the banking sector regulator, told a press conference.
China's banking sector is facing growing profitability pressure as lenders are nudged to provide cheap loans to boost a slowing economy, while loan demand remains weak amid a protracted property slump and subdued consumption demand.
The regulator will guide banks to improve management and to cultivate new profit growth points, said Liao.
"Banks and insurance institutions still have sufficient ammunition to offset risks," said Xiao Yuanqi, deputy head of the NFRA.
The regulator also said it would strengthen supervision of major shareholders at small- and medium-sized financial institutions to control their financial risks.
Small and medium-sized financial institutions should focus on their main businesses and not "blindly pursue excessive expansion", said Xiao.
Additionally, the regulator will continue to promote financial institutions to enhance support to the property sector.
Commercial banks have approved 5,392 property projects under the "whitelist" program that aimed at injecting liquidity into the crisis-hit sector, with a financing amount totaling nearly 1.4 trillion yuan ($196.25 billion), said Liao.
The regulator will also encourage local city governments to include qualified property projects into the program as much as possible to meet financing demand of projects that have difficulties in raising money, said Liao.
($1 = 7.1336 Chinese yuan renminbi)
(Reporting by Ziyi Tang and Bernard Orr; Editing by Jacqueline Wong and Muralikumar Anantharaman)
