UPDATE 1-China Shenzhen Bank shares slump on loan provisions

(Adds analyst quotes, details)

By Samuel Shen

SHANGHAI, Jan 13 (Reuters) - Shares in Shenzhen Development Bank 000001.SZ, controlled by U.S. private equity firm Newbridge Capital [NB.UL], tumbled on Tuesday after it set aside more bad-loan provisions and slashed its profit estimate following tough guidance from China's regulators.

The mid-sized Chinese lender, based in the southern boom town of Shenzhen and which has long carried high levels of bad debt relative to its peers, estimated that its net profit plunged 77 percent last year, as it would make 5.6 billion yuan ($819 million) of fresh provisions for bad loans.

"Shenzhen Bank has been saddled with more bad loans than other lenders and the government hoped that a major clean-out in its balance sheet would make life easier in the next few years," said Jin Lin, analyst at Everbright Securities Co.

"Asset quality at Chinese lenders will generally deteriorate as the economy slides further, but proper accounting treatment could smooth out profit fluctuations," said Jin, who expects China's listed companies to post a 15 percent drop in profit this year.

After several years of stellar growth, Chinese lenders face mounting challenges as loan delinquencies rise, asset prices tumble and investment returns shrink with the deepening global recession.

STRESS AMONG BORROWERS

Fitch Ratings said in a report published on Tuesday that the asset quality of Chinese banks will inevitably come under pressure from the worsened economic environment and rising stress among borrowers.