Chinese banks will likely see their profit margins squeezed in 2013 following last year's profit growth slump, PricewaterhouseCoopers (PwC) said Thursday.

The operating environment for banks will remain difficult in 2013, PwC said, citing interest rate liberalization, slower economic growth and stringent regulation as challenges Chinese banks will face.

The net profits of China's ten biggest listed banks rose 16.4 percent in 2012 from a year earlier, significantly lower than the 28-percent growth registered in 2011, according to a PwC report.

The total loans of the ten banks increased 13.7 percent last year, the lowest growth since 2008.

PwC said the quality of banking assets continues to be a source of concern in light of sluggish loan growth.

"The changing operating environment has compelled banks to innovate and transform. The drive for differentiation and service-centric and customer-centric operations will be conducive in enhancing a bank's ability to price and manage risks," said Raymond Yung, PwC financial services leader for China. Endi

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