Less than a year after its previous attempt, Handan Bank Co., Ltd. (hereinafter "Handan Bank") is once again seeking to bolster its capital base. Recently, the Hebei Financial Regulatory Bureau approved the bank's application to amend its registered capital, permitting the issuance of up to 1.36 billion new shares. While a similar share placement plan was approved at the end of October 2025, it ultimately failed to materialize as scheduled.

With this renewed push for a capital increase, the bank's need for fresh funds has become increasingly apparent. As of the end of June 2026, the bank's capital adequacy ratio stood at 10.97%, remaining precariously close to the 10.5% regulatory minimum. Handan Bank, which primarily relies on retained earnings for capital replenishment, is concurrently grappling with declining profitability and deteriorating asset quality. Following a trend of rising revenue but falling profit in 2025, the first half of 2026 saw the bank post a revenue of RMB 1.917 billion, down 8.7% year-on-year, and a net profit of RMB 305 million, a significant 27.8% decline. By the end of 2025, its non-performing loan (NPL) ratio had climbed to 1.65%, while the provision coverage ratio had fallen to 109.2%, breaching the regulatory requirement.

Two Consecutive Years of Approved Capital Raises

On September 9, the Hebei Financial Regulatory Bureau issued a formal reply approving Handan Bank's revised registered capital proposal. The approval allows the bank to raise up to 1.36 billion new shares. The bureau stipulated that the bank must strictly vet shareholder qualifications and scrutinize the sources of investment funds, ensuring all capital injections are proprietary and legally sourced, with a strict prohibition on funds derived from entrusted or debt capital.

This marks the second application for a capital scheme revision within two years. A previous plan to issue the same number of shares was approved in late October 2025. However, no changes to the bank's capital occurred over the following year, with its total share capital remaining at 3.776 billion shares, indicating the earlier approval was not acted upon. Handan Bank maintains a strong regional presence with 76 branches and sub-branches within Handan city and an additional 61 in other cities such as Shijiazhuang, Baoding, Xingtai, and Qinhuangdao. As of the end of 2025, its market share for deposits and loans in Handan was 12.58% and 11.34%, ranking second and third respectively. Despite this regional strength, the expansion of its business has intensified the pressure on its capital, serving as the primary driver for this new fundraising initiative.

The bank's capital adequacy metrics have seen notable fluctuations and a recent sharp decline. Between 2023 and 2025, its capital adequacy ratio was 13.07%, 13.88%, and 10.73%, respectively. Its tier-1 capital adequacy ratio stood at 12.25%, 12.72%, and 10.58%, while the core tier-1 ratio was 9.93%, 10.65%, and 8.69%. The 2025 figures represent a substantial drop across all three indicators. As of the end of June 2026, the capital adequacy ratio had inched up to 10.97%, with the tier-1 ratio at 10.68% and core tier-1 at 8.85%, yet the key ratio remains dangerously close to the regulatory floor. Industry analysts suggest that the bank’s continuous credit expansion, driven by its robust local market position, is rapidly consuming its core capital. This, coupled with stringent regulatory requirements in the banking sector, has left its existing capital unable to support its business growth and risk mitigation needs. The failure to implement the previous capital raise highlights the urgency for this new round of fundraising to strengthen its capital structure and support regional expansion, inclusive credit provision, and comprehensive risk management capabilities.

Asset Quality and Profitability Woes

The bank's ability to internally generate capital is being constrained by asset quality fluctuations and weak profit growth, forcing it to seek external funding. From 2023 to 2025, Handan Bank posted revenues of RMB 3.509 billion, RMB 3.776 billion, and RMB 4.859 billion, with net profits of RMB 645 million, RMB 801 million, and RMB 589 million, respectively. In 2025, while revenue surged by 28.7%, net profit fell by approximately 26.5%, highlighting a pronounced trend of revenue growth without profit expansion. In the first half of 2026, this trend continued with a revenue decline of 8.7% to RMB 1.917 billion and a net profit fall of 27.8% to RMB 305 million. The bank's net interest income for the period was RMB 1.358 billion, a 27.45% increase, accounting for over 70% of its total revenue. However, its non-interest income suffered, with net fee and commission income plummeting by 87% to RMB 367,900, and investment income falling by 62.4% to RMB 565 million.

On the expenditure side, the bank’s credit impairment losses for the first half of 2026 were RMB 994 million, a slight increase of 0.13% year-on-year, indicating sustained high provisioning. In 2025, these losses surged by RMB 1.232 billion to RMB 2.706 billion, which was the primary reason for the decline in its profitability. Rating agency Dagong International noted in a recent report that due to increased provisioning, the bank's net profit decreased, and its return on total assets remains low. Given the pressure on asset quality and the continued need for significant provisioning, the bank's profitability is expected to face considerable challenges.

The bank's asset quality indicators have been volatile. Between 2023 and the end of 2025, its NPL balances were RMB 2.84 billion, RMB 1.912 billion, and RMB 2.455 billion, with NPL ratios of 2.22%, 1.38%, and 1.65%. The provision coverage ratio during this period fell from 137.55% to 204.35% and then sharply to 109.2% by the end of 2025, breaching the regulatory minimum. The rating agency's report explains that despite increased provisioning efforts in 2025, aggressive write-offs reduced the loan loss reserves by RMB 1.227 billion to RMB 2.681 billion by year-end. Combined with the rise in NPLs, this ratio fell to 109.2%. In the context of a fluctuating regional economy and stricter asset classification rules, the bank's asset quality remains under downward pressure, necessitating further provisioning to enhance its risk-absorbing capacity.

Furthermore, while the bank has primarily used retained earnings for capital replenishment since 2025, the large-scale disposal of bonds led to the transfer of cumulative gains from other comprehensive income. This caused the bank's net capital to decline from RMB 20.104 billion at the end of 2024 to RMB 16.999 billion by the end of 2025. Simultaneously, its risk-weighted assets increased due to business expansion, leading to a decrease in capital adequacy levels and heightening the need for fresh capital. Dagong International suggests that with its internal capital generation capacity limited by asset quality and profitability pressures, Handan Bank will need to explore multiple avenues to raise capital and improve its capital strength in the future.

It is also worth noting that in June of this year, the Hebei Financial Regulatory Bureau approved the appointment of Liu Tai as the bank's new chairman. This marks the second change in leadership within two years. Whether Liu Tai, a veteran with extensive experience at the Bank of China, can successfully guide Handan Bank through its capital pressures and operational bottlenecks to achieve stable development remains to be seen.