# New Year "Capital Replenishment Rush": Small and Medium-Sized Banks Launch Wave of Capital Increases and Equity Expansion

◎ Reporter Xu Xiaoxiao

According to incomplete statistics from Shanghai Securities News, since the beginning of this year, dozens of city commercial banks and rural commercial banks, including Hubei Bank, Guangzhou Bank, and Jiujiang Bank, have disclosed or completed a new round of capital increase plans. The financing scale ranges from hundreds of millions to billions of yuan, all aimed at supplementing core Tier 1 capital to enhance risk resistance.

After capital supplementation, how can small and medium-sized banks turn external “blood transfusions” into endogenous “blood production” capacity to avoid falling into a cycle of “raising capital—consuming—raising again”? Industry experts suggest that the new capital should be precisely directed toward inclusive finance, green credit, and technology-based enterprises. At the same time, a sound long-term capital replenishment mechanism should be established by optimizing asset-liability structures and expanding intermediary businesses to strengthen retained earnings.

Why the intensive capital increases?

Recently, two more regional banks joined the capital expansion. Hubei Bank announced in early February that it had completed an issuance of 1.8 billion shares, increasing its total share capital to 9.412 billion shares, raising a total of 7.614 billion yuan; Guangzhou Bank also announced plans to further supplement capital through a capital increase.

It is understood that Guangzhou Bank has not completed a capital supplement for several years. Its latest financial report shows that by the end of Q3 2025, the bank’s core Tier 1 capital adequacy ratio had fallen to 7.73%, approaching the regulatory red line of 7.5%.

In addition to these two banks, Jiujiang Bank announced at the end of January that its private placement plan had received subscription intentions from major shareholders, including Jiujiang Finance Bureau and Industrial Bank; Shanxi Bank also stated in February that its capital increase plan had been approved by regulators.

From the intensive capital-raising actions of small and medium-sized banks, it can be seen that they generally face pressure to replenish capital. Data shows that by the end of Q4 2025, the average capital adequacy ratios of city commercial banks and rural commercial banks in China were 12.39% and 13.18%, respectively, both below the banking industry average of 15.46%. Most city and rural commercial banks’ core Tier 1 capital is under pressure.

“Capital increases mainly aim to meet regulatory requirements and cope with the dual pressures of asset expansion: on one hand, regulators are continuously raising capital adequacy requirements, putting some small and medium-sized banks under compliance pressure; on the other hand, the growth in credit demand accelerates capital consumption, making capital increases the most direct and effective way to replenish core Tier 1 capital,” said Lou Feipeng, researcher at Postal Savings Bank of China, to Shanghai Securities News.

Private placements become the main tool

A prominent feature of this round of capital increases among small and medium-sized banks is the significant role played by local state-owned capital. For example, Hubei Bank’s latest private placement report shows that among the 53 corporate shareholders, besides 18 existing shareholders, 35 new state-owned legal persons participated, with only one private enterprise involved. The state-owned capital subscription ratio exceeds 96%.

Lou Feipeng explained: “In terms of pricing, some banks issue shares at slightly above net asset value, providing investors with a certain premium; in terms of terms, they often include rights of first refusal, dividend commitments, or future listing expectations. The participation of local governments and state-owned enterprises also boosts market confidence.”

In fact, the channels for small and medium-sized banks to replenish core Tier 1 capital are very narrow and challenging. “Private placements have become a mainstream and direct method for non-listed banks to increase capital. By issuing new shares to specific investors, they can quickly supplement core Tier 1 capital and directly enhance the bank’s risk resistance,” said a financial analyst from a large state-owned bank to Shanghai Securities News.

It is also noted that regional differences are evident in this wave of “blood replenishment.” Banks in the eastern coastal areas are actively subscribing, while some banks in central and western regions face fundraising pressures. Professor Tian Lihui of Nankai University’s Finance Department explained to Shanghai Securities News that economically strong provinces in the east and central regions, backed by robust state-owned capital injection capabilities, achieve a virtuous cycle. Conversely, less developed areas’ rural and city commercial banks tend to fall into a negative cycle of capital shortages and relatively weak local economic growth.

Dong Yaohui, deputy director of the Shenzhen Financial Stability Development Research Institute, suggested in an interview with Shanghai Securities News that regulators should tilt the allocation of special bond quotas toward potential midwestern institutions and broaden their channels for capital replenishment. Meanwhile, reform and restructuring should be steadily promoted, encouraging the establishment of provincial rural commercial banks to resolve existing risks, leveraging industrial advantages to attract eastern institutions to invest cross-regionally, and introducing funds and advanced experience.

Compared to regional banks, listed banks can leverage more market-oriented tools to optimize capital structure. For example, on March 7, Chengdu Bank announced that its capital change registration had been approved, and it would redeem and delist its convertible bonds in advance, thereby increasing capital.

Activating endogenous growth

With improved capital adequacy ratios, small and medium-sized banks’ ability to resist credit and market risks has significantly increased, providing a thicker safety cushion for coping with macroeconomic fluctuations and resolving existing risk hidden dangers. Industry insiders believe this not only helps stabilize regional financial ecosystems but also provides banks with valuable buffers for deepening operational transformation.

However, capital increases are not a one-time solution. After “blood replenishment,” it is essential to strengthen precise credit deployment and enhance endogenous “blood production” capacity.

Lou Feipeng suggested that small and medium-sized banks should prioritize new capital allocation to areas aligned with national strategic directions: on one hand, deepening and solidifying inclusive finance, leveraging geographical advantages to precisely serve small and micro enterprises and individual businesses; on the other hand, increasing support for green low-carbon industries, technology-based enterprises, and manufacturing technological upgrades to help cultivate new productive forces locally.

For their part, Dong Yaohui believes that after consolidating their capital base, small and medium-sized banks must abandon the “scale obsession” of competing with large banks and pursue differentiated development. The key is to adhere to the distinctive positioning of “serving local areas, small micro enterprises, and urban-rural residents,” leveraging their short decision-making chains and local connections, deeply cultivating sinking markets, and precisely serving long-tail clients to solidify endogenous profitability with “small but refined” localized services.

Dong further stated that small and medium-sized banks should accelerate the transformation toward “light capital” business models, vigorously developing wealth management, specialty supply chain finance, and other intermediary businesses based on regional economic characteristics, to escape the heavily capital-consuming path of credit expansion and achieve capital-intensive utilization. In risk management, they should strictly control risks from cross-regional expansion and increase efforts to dispose of existing non-performing assets to prevent potential risks from eroding new capital.

(Edited by Qian Xiaorui)

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