(Bloomberg) — Shares of Chinese banks slumped following weak earnings, with analysts concerned the global trade war will further undermine their profit.

Most Read from Bloomberg

Lenders were the worst performers in the Hang Seng China Enterprises Index after some of them reported a drop in profit and lower margins. Industrial & Commercial Bank of China Ltd. fell as much as 6% in Hong Kong, after China’s biggest bank saw its net income fall 4% in the first quarter. Shares in China Merchants Bank Co. and Postal Savings Bank of China Co. slid at least 5%.

The financial health of Chinese lenders is being closely watched as Beijing gears up for a deepening trade dispute with the US. Banks’ profits were already under pressure after China stepped up monetary stimulus late last year, lowering rates applied on loans and mortgages. Analysts are also worried the escalating trade war will hurt the banks’ overseas business.

Banks “continue to face pressure of having to support the China economy amid an uncertain economic environment and this is evident in numerous banks reporting falls in net profits,” said Michael Chang, head of Asia financials at CGS International Securities HK. “Net interest margins are still on a downward trajectory, with no signs of any bottoming amid likely continued monetary easing.”

Chinese officials have indicated they may further loosen monetary conditions to bolster the economy, suggesting lenders will continue to face margin squeeze. China will lower reserve requirement ratio and interest rates based on domestic and international economic situation, to ensure ample liquidity, the People’s Bank of China’s Deputy Governor Zou Lan said at a briefing this week.

The slide in banking shares drove a 0.4% drop in the Hang Seng China Enterprises Index, which underperformed the MSCI Asia Pacific gauge’s advance. China Construction Bank Corp. saw a big decline as shares traded ex-dividend.

“Most of the big lenders saw a pretty big contraction in net interest margin from end of last year, largely thanks to mortgage loans repricing in January after earlier cuts in loan prime rates,” said Francis Chan, an analyst with Bloomberg Intelligence. “The outlook for margins doesn’t look so rosy either as there’s bigger probability of more rate cuts this year.”