Shares of Chinese banks slipped in Shanghai?Monday even as a report published by The Banker showed they accounted for almost a third of global banking industry profits last year.

Analysts said that Chinese banks are facing challenges, including more market competition for capital, as China speeds up its interest rate reform by allowing banks more flexibility in offering interest rates.

Chinese lenders accounted for nearly a third of global bank profit last year, up from 4 percent in 2007, leading the emerging markets into a new era of banking dominance, while their European peers count the cost of the eurozone sovereign debt crisis, according to The Banker magazine's annual rankings published yesterday.

China's three biggest lenders, Industrial and Commercial Bank of China, China Construction Bank, and Bank of China, topped the profit table.

ICBC led for the second successive year with pretax earnings of US$43.2 billion, followed by CCB, which delivered a US$34.8 billion profit, and BOC with earnings of US$26.8 billion according to The Banker.

"While there are concerns about China's real estate market, and whether arrears on corporate and municipal lending are adequately reported, Chinese banks appear to have a vast cushion of profits with which to tackle problem loans as they arise," said the report.

Four Chinese banks were in the top 10 in terms of tier 1 capital, the core measure of a lender's financial strength. ICBC displaced HSBC and entered the top three worldwide for the first time. Bank of America is first on the list followed by JPMorgan.

But the report also noted that Chinese lenders' assets are just 13 percent of the global total, compared with their profits accounting for 30 percent. Their capital-to-assets ratios are significantly lower than for banks in other major emerging markets.

ICBC shares retreated 0.3 percent in Shanghai yesterday to 3.94 yuan. CCB lost 0.5 percent to 4.18 yuan, while BOC shed 0.4 percent to 3.94 yuan.