Bank of China (BOC), the country's flagship foreign exchange lender, said yesterday its third-quarter net profit rose 12 percent on higher fee income, but earnings growth slowed as margins fell and the economy began to cool.

"Banks' profit growth is in a downward trend, and their asset quality problem is just emerging," said Fan Kunxiang, an analyst at Haitong Securities.

BOC, China's second-largest bank, reported July-September net profit of 17.8 billion yuan ($2.61 billion), up from 15.9 billion yuan in the same period last year, under international accounting standards.

The bank said its nine-month impairment losses on assets stood at 26.3 billion yuan, more than double the 10.8 billion yuan in the same period a year ago, due to the increase in impairment losses on loans and foreign currency investment securities.

During the same nine-month period, the bank said net interest margins decreased from a year ago to 2.68 percent. Loans and advances to customers rose 15.4 percent to 3.3 billion yuan.

Bank of China's first-half profit rose 43 percent.

BOC's net fee and commission income rose slightly to 9.5 billion yuan, from 9.4 billion yuan a year ago.