China’s tightening monetary policy may lead to a rebound in bad loans which will erode banks’ profitability, Standard & Poor’s said. The Chinese banks may see their non-performing loan ratio climb to 5% to 10% in three years. Still, S&P maintains its “stable” outlook for the banking sector because of the lenders’ asset quality, profitability, liquidity and capital. The official NPL ratio of Chinese banks dropped to 1.2% at the end of 2010 from 24% in 2002.