China's commercial banks saw their assets continue to rise in February, but the growth rate slowed, data from the banking regulator showed Tuesday, indicating pressure on the sector following interest rate liberalization and competition from other financial institutions.

The total assets of the banks reached 133.5 trillion yuan ($21.5 trillion) by the end of February, growing 17.3 percent from a year ago but slower than January's 18.7 percent year-on-year growth, according to statistics released by the China Banking Regulatory Commission (CBRC) Tuesday. 

Disintermediation, or withdrawal of bank deposits for higher-return investments, along with interest rate liberalization, has raised funding costs for banks and put pressure on lending asset growth, said Liu Xiao at Beijing-based Anbound Consulting.

Credit assets outside the banking system, such as those of less regulated trust companies, expanded much more quickly.

Assets held by trust companies grew by 55 percent to 7.5 trillion yuan in 2012, according to data released by the China Trustee Association. Their assets now exceed those held by the insurance sector and are second only to those of the banking sector.

"The trend of further interest rate liberalization and disintermediation has eroded partial profit and will force some banks to become financial conglomerates in order to expand revenue streams and raise profit," Liu told the Global Times Tuesday.

Ma Weihua, president and CEO of China Merchants Bank, recently called on regulators to remove obstacles to commercial banks investing in non-banking financial institutions such as securities trading, insurance and investment funds.

Three of the country's top five banks have posted their annual reports.

China Construction Bank reported Monday that its profit grew by 14 percent in 2012 from a year ago, the lowest growth rate over six years.

Bank of China's profit grew by 12.2 percent year-on-year, the lowest growth rate since 2005, and Agricultural Bank of China's profit growth was 19 percent in 2012, the lowest since 2010 when the bank got listed.

The net profit of the banking sector reached 1.24 trillion yuan in 2012, up 19 percent year-on-year, the CBRC data showed.

The banking sector will face challenges over the next 12 months in the form of poor asset quality, inflation and tightening monetary policy, and it is estimated that profit growth in the sector will be 6.21 percent in 2013, falling to 3.71 percent next year, according to a recent report from BOC International China Ltd.

As China lowers its GDP growth, less need for new lending also indicates slower growth for banking, Jin Lin, a banking sector analyst at Orient Securities, told the Global Times Tuesday.

New lending totaled 8.2 trillion yuan in 2012, according to the central bank.