China's top four banks are on course for their weakest annual profit growth since going public as the central bank's interest rate cuts in the middle of the year kick in, slicing lending margins.

After posting profit gains of more than 20 per cent for years, the so-called "Big Four", led by Industrial and Commercial Bank of China, are expected to report growth of as little as 5 per cent this year, according to Thomson Reuters Starmine.

That would be the slimmest growth since China Construction Bank (CCB) became the first of the four to list in 2005, following the central bank's interest rate cuts in June and July.

The sobering estimate comes after the banks, including Agricultural Bank of China and Bank of China, surpassed third-quarter profit expectations, helped by the central bank's landmark decision to allow lenders to set their own loan rates.

Smaller lenders such as Bank of Communications reported earnings that largely met expectations as a rise in loan volumes offset flat to narrower interest margins.

The central bank's rate cuts - and the resulting narrower margins - will be felt most keenly by the smaller banks, including China CITIC Bank Corp and China Minsheng Bank, which have no choice but to compete with state-owned behemoths by offering cheaper loans.

China Minsheng's third-quarter net interest margin narrowed 10 basis points to 3.04 per cent, while China Merchants Bank's margin shrank 11 basis points to 2.92 per cent.

The plight of the smaller banks will also be exacerbated by a scramble for deposits after the central bank gave lenders more leeway in setting their own deposit rates, on top of loan rates.

TODAY