(Yicai Global) July 14 -- China’s banking stocks have been on the slide over the past two days since a growing number of early buyers of residential projects under development in the country started to refuse to pay back their mortgages as a tight financing environment has meant that many developers are struggling to complete construction on time.

The banking sector’s index on financial data platform Wind closed down 2.1 percent today and 2.2 percent yesterday.

Those lenders with a particularly high exposure to mortgages tumbled. Ping An Bank’s share price [SHE:000001] slumped 4.2 percent to close at CNY13.37 (USD1.98) today, China Merchants Bank [SHA:600036] tumbled 3.7 percent to CNY36.48 (USD5.41) and Postal Savings Bank of China [SHA:601658] sank 3.6 percent to CNY4.72 (USD0.70).

Buyers in around 150 housing projects across 20 provincial-level regions have banded together to demand that developers restart building and that the houses are delivered within a reasonable period of time otherwise they will stop repaying their bank loans, according to the latest data. Most of these unfinished projects are in smaller second-, third- and fourth-tier cities.

The amount involved is not great, amounting to anywhere from 0.9 percent to 1.9 percent of the mortgage balance paid in the first quarter at between CNY360 billion (USD53.4 billion) and CNY730 billion, TF Securities said in a recent research report. It will be hard for this amount to cause a systemic shock, it added.

Still the development will cast a cloud over some encouraging first-half results. Bank of Nanjing, Jiangsu Suzhou Rural Commercial Bank, Bank of Hangzhou and Wuxi Rural Commercial Bank all logged a more-than 20 percent leap in profit in the six months ended June 30 from the same period last year on strong lending and better asset quality, according to their latest earnings reports, raising investors’ hopes that other banks have done equally well.

Of those lenders likely to be most affected by the latest developments, China Construction Bank, Postal Savings Bank of China, Industrial and Commercial Bank of China, Agricultural Bank of China, Industrial Bank, China Merchants Bank and Ping An Bank all have comparatively high proportions of mortgages, while those with the biggest exposure to property developers’ loans are China Minsheng Bank, Ping An Bank, China Merchant Bank, Industrial Bank and China Everbright Bank.

Editors: Liao Shumin, Kim Taylor