BEIJING - Profit growth of Chinese listed banks is likely to slow down to around 20 percent next year, according to a report released by the Bank of Communications (BOCOM), the country's fifth biggest commercial bank by asset scale.

The deceleration was mainly caused by a decline of growth in interest-earning assets, due to stable credit growth, a slowdown in foreign capital inflow and an increase in funds flowing out of the banking system, said the report.

The bank estimated that interest-earning assets of Chinese commercial banks will rise by 14 percent next year and contribute 15 percent of total net profit, compared with a 17 percent contribution in 2011.

Meanwhile, BOCOM said banks might not be able to seek more profit from net interest margin expansion, as a less tightened monetary condition is unlikely to bring further interest rate hike next year.

Eased credit supply will also cause slower growth in intermediary business, which could reduce revenue growth from commission charges, said the report.

However, supported by a steady macro economic environment, asset quality of China's commercial banks will stay stable next year, the BOCOM report said.

The bank said China's local government debt condition is "under control," but it warned of hidden trouble in parts of the country.

Real estate and small business loans might bring risks to the banking system, but they will not largely affect the overall situation, it added.

The bank estimated that new lending in 2012 will stay between 8 to 8.5 trillion yuan ($1.26 to $1.34 trillion). This compares to a market expectation of nearly 7.5 trillion yuan new loans this year.

The central bank might encourage more bank lending next year to fuel development of real economy, but the monetary condition is unlikely to be significantly loosen, said the report.

To boost credit supply, the central bank might cut banks' reserve requirement ratio two to four times by the end of 2012 by 50 basis points each time, according to the report.

Earlier this month, the central bank has cut banks' reserve requirement ratio (RRR) by 50 basis points -- the first decrease in three years -- to ease a liquidity strain as inflation softened.