Chinese banks must strengthen their risk management ability to support differentiated loan pricing strategies for small businesses and improve returns with risk pricing models based on big data, Accenture China said in a report.

Accenture, a multinational management consulting, technology services and outsourcing company, surveyed 69 Chinese city commercial lenders and found a decline in performance in general. Fifty-three recorded slower operating revenue growth in 2014 compared with 2010.

The report said city commercial banks are affected by the worsening performance of large companies amid China's economic downturn, as the banks' business is concentrated on large companies and they are inadequate to satisfy the financial demands of small- and medium-sized enterprises.

Last year, loans to the top 10 clients accounted for 32.8 percent of the total for city commercial banks, much higher than 13.8 percent for large commercial lenders.

Statistics also revealed that city commercial lenders are relying heavily on net interest income, which accounted for 78 percent of operating income last year. In contrast, intermediate business income only accounted for 4.97 percent, compared with 18.2 percent for large State-owned banks and 22.3 percent for joint-equity commercial lenders.

Accenture advised city commercial banks to adjust client structure by digging into local small- and medium-sized enterprises to explore new sources of low-cost funds.

In recent years, the banks have faced increasing pressure of risk management with a rise in nonperforming loan ratios.

According to the China Banking Regulatory Commission, outstanding nonperforming loans of city commercial lenders reached 121.5 billion yuan ($18.87 billion) as of Sept 30, up from 85.5 billion yuan at the end of last year. The NPL ratio increased 28 basis points to 1.44 percent during the same period.

As many small businesses are too weak to withstand economic fluctuations, the banks need to introduce and develop risk management instruments, the report said. Lenders could draw on the innovative risk management measures of online financial service providers and acquire data for analysis through cooperation with Internet companies, e-commerce platforms and credit rating companies.