Chinese banks last year posted their highest profits in at least four years, despite a slight rise in bad loans for some in the fourth quarter amid a slowing economy. About 3,800 institutions in China, including policy banks, commercial, city and rural commercial lenders, earned about CNY1.25 trillion last year – up 39% year on year – according to the China Banking Regulatory Commission’s annual report. Banks have come under fire recently for racking up fat profits while continuing to pay depositors meagre interest rates that do not even keep up with inflation. Banks’ fee income contribution to overall income rose 2 percentage points to 14% last year. Net interest income contribution continued to increase, by 20 basis points, to 66.2%, due to a fall in treasury and other income. Bad loans, which came under scrutiny following a lending spree in the aftermath of the global financial crisis, continued to drop in both volume and ratio even though they rose slightly for some banks in the final quarter last year. Overall, non-performing loans (NPL) in China’s banking system fell to CNY1.05 trillion at the end of last year. The non-performing loan ratio fell 0.66 percentage points to 1.77%. Even though the banks’ total loan loss reserve, which is money set aside for potential bad loans, reached CNY1.19 trillion and the loan loss coverage ratio rose 60.4 percentage points to 278.1%, some analysts remain skeptical over whether banks are setting aside enough money for loans that may turn sour.