Chinese banks have the means to deal with corporate bond and trust defaults, Deutsche Bank said in a research note on April 15.

A study by the bank found that listed Chinese banks hold 37 percent of outstanding debts in China's corporate bond market and have provided 36 percent of the funding for the country's trust sector.

That puts 88 billion yuan ($14.14 billion) worth of bank assets at risk. But according to Deutsche Bank, they are well covered by the 819 billion yuan ($132 billion) the banks have set aside to cover bad assets.

The bank said its study covers 2,400 corporate bond issuers and 13,000 trust products, with a total credit balance of 237 billion yuan ($38 billion).

The bank said only 22 out of 2,400 bond-issuing firms are highly risky. Sixty-five percent of these firms are from industries saddled with overcapacity, including the steel, mining, metal and solar sectors.

China also witnessed the first onshore corporate default in March when a Shanghai-based solar firm failed to pay 89.8 million yuan ($14.4 million) in interest.

Meanwhile, authorities and banks have shown growing reluctance to bail out troubled assets, which analysts said could help correct distortion in risk pricing but could also stoke fear of more defaults to come.

Deutsche Bank said while May and June could see a peak number of bonds and trust products come due, investors could learn that actual defaults are less than they thought, regaining confidence in Chinese banks.

The report also added that it is normal for defaults to rise steadily as a way to correct distortions in pricing credit risks and improve the efficiency of capital allocation.