Latest financial results from Chinese banks show that their net profits continued to be weighed down by the challenging operating environment, despite regulatory effort to support their profitability, Fitch Ratings says.

Fitch expects net profit growth to be in the single digits in the medium term, and this slow profit growth is likely to put Chinese banks' capitalisation under pressure as growth in their risk-weighted-assets (RWA) continues to outpace that of net profit and assets.

Fitch has a negative sector outlook on Chinese banks, reflecting banks' struggles to meet regulatory requirements while sustaining adequate loan expansion to support economic growth. Banks' profit growth in 2018 was also dragged down by higher impairment charges, due to increased efforts to resolve NPLs subsequent to tightened NPL recognition against overdue loans.