Mid-sized banks are busy "replenishing their capital."

Beijing Business Daily (Reporter Meng Fanxia, Zhou Yili) - Since the beginning of the year, a wave of capital increases among small and medium-sized banks has continued. City commercial banks, rural commercial banks, and village banks are actively raising capital through various methods such as private placements, rights issues, and convertible bonds.

On March 11, Beijing Business Daily noted that the Sanming Regulatory Bureau of the China Banking and Insurance Regulatory Commission approved the implementation of the “Fujian Yong’an HSBC Village Bank Share Issue and Capital Increase Plan,” whereby Yong’an HSBC Village Bank will issue an additional RMB 15 million in registered capital to HSBC Bank (Hong Kong) Limited, which will subscribe with RMB 15 million in cash.

On March 7, Chengdu Bank also announced that it received approval from the Sichuan Financial Regulatory Bureau to change its registered capital from RMB 3.736 billion to RMB 4.238 billion. This change is due to the early redemption and delisting of the bank’s convertible bonds, increasing its total shares to 4.238 billion.

Earlier, in February, Hubei Bank disclosed in its private placement report that it issued 1.8 billion shares to 53 corporate shareholders at RMB 4.23 per share, successfully raising RMB 7.614 billion. The total share capital increased to RMB 9.412 billion, and registered capital also increased to RMB 9.412 billion. Hubei Bank stated that all funds raised will be used to replenish the bank’s core Tier 1 capital, improve capital adequacy, and strengthen its capital base and risk resistance.

It is noteworthy that Hubei Bank’s capital increase highlights the dominance of local state-owned assets, with the exception of Jinpai Co., Ltd., a private enterprise; the rest are state-owned enterprises at the provincial, city, and county levels.

Additionally, Guangzhou Bank recently announced on its official website that it plans to carry out a capital increase to further strengthen its capital base; Jiujiang Bank announced that its private placement plan has received subscription intentions from the Jiujiang Municipal Finance Bureau and Industrial Bank; Shanxi Bank also disclosed that its capital increase has been approved by regulatory authorities. The capital replenishment efforts of local small and medium-sized banks are showing a trend of multiple points of progress and concentrated implementation.

From an industry perspective, data from the China Banking and Insurance Regulatory Commission shows that by the end of Q4 2025, the average capital adequacy ratio of city and rural commercial banks was 12.39% and 13.18%, respectively, both below the 15.46% average for commercial banks; non-performing loan ratios were 1.82% and 2.72%, significantly higher than the industry average of 1.5%. Some banks’ core Tier 1 capital adequacy ratios are approaching regulatory red lines.

In response, renowned economist Pan Helin stated that the current wave of capital increases among small and medium-sized banks is driven by several core reasons: first, regulatory pressure and the strict capital adequacy requirements compel these banks to seek financing proactively; second, the need to resist risks highlights that sufficient capital is a buffer against non-performing assets and operational risks; third, business development needs require capital replenishment to maintain growth and pursue healthy expansion; fourth, confidence boosting—by introducing high-quality capital, market recognition and confidence in these banks can be enhanced.

“The core reasons for this wave of capital increases among small and medium-sized banks are stricter capital regulation, slowing endogenous profitability, asset quality pressures, combined with policies aimed at resolving local financial risks and serving the real economy,” said Wang Pengbo, Chief Analyst at Botong Consulting. He further pointed out that the most distinctive features of this round of capital increases are: first, state-owned assets are the main participants; second, there is a focus on replenishing core Tier 1 capital; third, the implementation pace is faster, with higher regional concentration, emphasizing risk prevention and prudent management.

Analyst Liao Hekai from Jinle Function believes that the dominance and deep participation of state-owned assets, diversification of capital increase methods, and accelerated regional approvals will promote clearer structural differentiation in the small and medium-sized bank industry. In the future, capital management will shift from simply pursuing “quantity” expansion to emphasizing “quality” improvement, optimizing capital structures, and resolving historical issues to achieve high-quality development.

The intensive capital replenishment will also bring multiple benefits to small and medium-sized banks. Pan Helin emphasized that sufficient capital first acts as a “buffer,” enhancing liquidity resilience to address potential liquidity risks; second, it can optimize capital structure and strengthen core Tier 1 capital, helping banks reduce funding costs and meet regulatory requirements smoothly; third, capital replenishment supports business transformation, helping banks break through traditional bottlenecks and pursue diversification.

“Capital replenishment directly enhances the risk resistance of small and medium-sized banks, alleviates high non-performing loan pressures, optimizes capital structure, reduces financing costs, improves equity structure, strengthens corporate governance, supports financial transformation, and stabilizes regional financial stability while better serving the real economy. It is a key driver for industry transformation towards quality and efficiency,” said Liao Hekai.