SHANGHAI (Reuters) – Chinese banks could see their bad loan ratio of property loans more than double by the end of 2021 from the middle of the year, S&P Global (NYSE:) Ratings said, as headwinds in the Chinese property sector intensified in the second half.

The non-performing loan (NPL) ratio of property loans at Chinese banks may rise to 5.5% by the year-end from 2.5% in mid-2021 and 2% at the end of 2020, S&P said in a research note on Wednesday.

The stresses in the property sector, in which about one-third of developers are estimated to be in financial trouble, will also contribute about 20 basis points to the overall 1.75% NPL ratio for 2021, S&P said, potentially diluting the profitability of lenders.

Banks with aggressive risk appetites or high geographic concentration could be left with thinner collateral buffers, and thus likely to experience greater strain, S&P said.

China’s bank and insurance regulator repeatedly warns of the pressure that banks face from non-performing asset non-performing debts. The outstanding non-performing loans totalling 3.6 trillion Yuan at September end were among those cited by China’s banking, insurance, and regulatory authorities.

Some lenders recently modified their lending policies to comply with the new central bank guidelines of “meeting normal financing needs” for the sector. However, authorities are yet to signal they will loosen the “three redlines” financial conditions that were imposed by the central banks last year and which developers have to meet in order to obtain bank loans.

“The key policy direction remains unchanged,” said S&P, which expected nil growth in property development loans in 2022 and modest growth over 2023 and 2024.