Chinese banks' bad loans increased for a third straight quarter,the longest streak of deterioration in eight years, highlightingpressures on asset quality and profit growth as the economyweakens.

Non-performing loans rose by 18.2 billion yuan ($2.86 billion)in the three months ended June 30 to 456.4 billion yuan, the ChinaBanking Regulatory Commission said in a statement on its websitetoday. Bad loans surged at all types of banking institutions,including the largest state-owned lenders, rural banks and foreignbanks, the regulator said.

Chinese lenders are grappling with rising defaults, weaker loandemand and lower lending profitability after economic growthdecelerated for a sixth quarter and the central bank cut interestrates twice this year. Combined net income growth at the nation's3,800 lenders slowed to 23 percent in the second quarter from 24percent in the previous three months, the regulator said today.