# 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 several hundred million to several billion 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 accumulation.

Why the intensive capital increases?

Recently, two more regional banks joined the capital increase and share expansion trend. In early February, Hubei Bank announced the completion of an 1.8 billion share issuance, 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 share expansion.

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 the third quarter of 2025, the bank’s core Tier 1 capital adequacy ratio had fallen to 7.73%, approaching the regulatory red line of 7.5%.

Besides these two banks, there are also: at the end of January this year, Jiujiang Bank announced that its targeted issuance plan had received subscription intent letters 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 increase actions of small and medium-sized banks, it can be seen that they generally face capital replenishment pressures. 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’s average of 15.46%. Most city and rural commercial banks’ core Tier 1 capital remains 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 share expansion 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 as 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. Take Hubei Bank as an example: its 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, 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.

The reporter also noted that this wave of “blood replenishment” shows regional differentiation: banks in the eastern coastal areas are actively subscribing, while some banks in central and western regions face fundraising pressures. Professor Tian Lihui, a finance expert at Nankai University, explained to Shanghai Securities News that the strong capital injection capacity of the eastern and central economic provinces creates a virtuous cycle, whereas underdeveloped regions’ 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 to broaden their capital replenishment channels. 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 cross-region investments, and introducing funds and advanced experience.

Compared to regional banks, listed banks can more extensively utilize 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 convertible bonds early and delist the bonds, thereby achieving capital increase.

Activating endogenous growth momentum

With the improvement of capital adequacy ratios, the ability of small and medium-sized banks 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 that this not only helps stabilize regional financial ecosystems but also provides banks with valuable buffers for deepening operational transformation.

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

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

For small and medium-sized banks themselves, Dong Yaohui believes that after consolidating their capital base, achieving long-term healthy development requires abandoning the “scale obsession” of competing with large banks and pursuing differentiation. The key is to adhere to the distinctive positioning of “serving local areas, small micro enterprises, and urban-rural residents,” leveraging the advantages of 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 also need to accelerate the transformation toward “light capital” business models, vigorously developing wealth management, specialized supply chain finance, and other intermediary businesses based on regional economic characteristics, to break away from the heavily capital-consuming credit expansion path 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.