Dozens of small and medium-sized banks pile into "replenishing capital" in the first quarter; under the focus on core responsibilities and main businesses, does the path to expanding scale need to change?

Ask AI · How will focusing on core business change the development path of small and medium-sized banks?

Cailian Press, April 1st (Reporter Liang Kezhi) Since the beginning of this year, small and medium-sized banks have been more actively and frequently raising capital.

On March 31st, the People’s Bank of China’s Monetary Policy Committee’s first-quarter meeting announced again emphasized the need to “promote small and medium-sized banks to focus on their main responsibilities and core businesses, and strengthen their capital adequacy.” Cailian Press reporters noted that from January to March this year, at least 50 domestic small and medium-sized banks have had their capital increase plans approved or capital injections changed, according to the official website of the State Financial Regulatory Administration.

The latest market example is that on March 31st, against the backdrop of no progress in IPOs and continued tightening of capital constraints, Guangxi Beibu Gulf Bank announced on its official website that a special shareholders’ meeting will be held on April 15th to confirm the capital increase and share expansion plan for 2025. According to previous regulatory approval information, Beibu Gulf Bank’s targeted fundraising plan is to issue 274,367,088 shares, at 1 yuan per share, which will increase capital by at least 274 million yuan.

Apart from Beibu Gulf Bank, recently, several local banks such as Chengdu Bank and Guangzhou Bank have also announced capital increases, mainly involving local state-owned enterprises.

A corporate banking executive from a South China city commercial bank said that under limited capital, this year’s focus will be on major local development projects, urban renewal, and new productive forces, while high-risk sectors like real estate, credit cards, online lending channels, and off-site business will be minimized. Meanwhile, they will optimize through quota and asset swaps among these areas.

Issuing bonds alone cannot “quench thirst”; equity financing is the “core”

In terms of scale, the 274 million yuan targeted fundraising by Beibu Gulf Bank is not large, but considering its financial data, the necessity behind it is very clear.

Cailian Press reporters noted that by the end of Q3 2025, Beibu Gulf Bank’s total assets reached 542.48 billion yuan, a 4.22% increase year-on-year; loan balance was 321.95B yuan, up 11.16% year-on-year, significantly faster than asset growth. Meanwhile, deposit growth was only 5.65%, indicating slightly insufficient support from liabilities.

Additionally, the bank’s core Tier 1 capital adequacy ratio was 8.70%, close to the regulatory red line. If credit growth reaches double digits, capital replenishment becomes even more urgent.

In fact, Beibu Gulf Bank has recently frequently issued perpetual bonds, Tier 2 capital bonds, and other instruments to supplement capital. By the end of Q3 2025, the balance of capital supplement tools reached 8.5 billion yuan.

A person from a South China city commercial bank’s board office said that the perpetual and Tier 2 bonds mainly supplement other Tier 1 or Tier 2 capital, but the core Tier 1 capital that truly determines risk resistance still depends on equity financing.

Local state-owned capital leads this round of local bank capital increases

Regulatory data shows that by the end of 2025, the capital adequacy ratios of city commercial banks and rural commercial banks are 12.39% and 13.18%, respectively, both significantly below the overall commercial bank level of 15.46%.

On the other hand, Cailian Press reporters noted that, in terms of participants, local state-owned capital has become the “absolute main force” in this round of capital increases.

Public information shows that whether it’s Hubei Bank’s over 96% subscription ratio by state-owned capital in its private placement, Qinghai Bank’s introduction of provincial state-owned enterprise shareholders, or Shanxi Bank’s sole capital injection by the provincial finance department, all indicate that local governments are strengthening their influence in the financial system.

The aforementioned board office person said that against the backdrop of risk disposal for small and medium-sized banks, local governments intend to stabilize and strengthen local financial power through state-owned enterprise injections. Additionally, increasing their shareholding influence in banks is more conducive to coordinating and promoting major local economic development projects and financing.

Are small and medium-sized banks slowing down their return to core business?

It is worth noting that this round of capital increases for small and medium-sized banks is not entirely aimed at “scaling up.”

The 2026 Financial Stability Work Conference and the People’s Bank of China’s first-quarter meeting both emphasized that small and medium-sized banks should “focus on their main responsibilities and core businesses” and “enhance capital strength.” This means that under the strengthened capital constraints, banks need to pay more attention to risk control and capital efficiency rather than simply expanding scale.

A banking analyst from a Beijing securities firm said that from a positive perspective, small and medium-sized banks are being forced to change their “big investment and big lending” model, optimize asset structures, which will promote specialization and differentiation in their operations, while also increasing investment in and emphasis on soft competitiveness such as service.

However, from a longer-term perspective, multi-channel capital raising remains the norm for small and medium-sized banks.

A report from Xiangcai Securities believes that looking ahead to 2026, with the implementation of a second round of special national bonds to supplement capital, innovation in capital replenishment models for small and medium-sized banks, and the participation of long-term capital such as insurance funds, the banks’ capital strength is expected to be further consolidated.

(Reporter Liang Kezhi, Cailian Press)