Jiangxi Bank (01916.HK) has recently released a series of announcements indicating an intensified push to shore up its capital base. The bank secured regulatory approval from the Jiangxi Financial Regulatory Bureau to issue up to 11 billion yuan in capital instruments, including perpetual bond and subordinated bond offerings. Simultaneously, its board approved a private placement plan to issue up to 715 million domestic shares to specific investors and no more than 215 million H shares through a non-public offering, with all proceeds after expenses directed toward replenishing core Tier 1 capital. This issuance remains subject to approval from an extraordinary general meeting of shareholders.

This marks the first time in eight years since its listing that Jiangxi Bank has initiated a large-scale private placement. The capital drive is driven by the urgent reality of its capital adequacy ratios declining for consecutive years. As of the end of 2025, its core Tier 1 capital adequacy ratio, Tier 1 capital adequacy ratio, and total capital adequacy ratio had fallen to 8.6%, 11.5%, and 12.41%, respectively. In terms of performance, the bank recorded operating revenue of 9.028 billion yuan in 2025, a year-on-year decline of 21.89%, while net profit attributable to shareholders dropped by 8.74%. Additionally, the H share price has languished at low levels, closing at 0.635 Hong Kong dollars per share on August 11, a significant drop from its 2018 IPO price of 6.39 Hong Kong dollars. This prolonged period of trading below book value presents substantial challenges for the upcoming private placement.

Dual Capital Boost: Debt and Equity

On August 5, Jiangxi Bank announced that it had received approval from the Jiangxi Financial Regulatory Bureau to issue perpetual bonds and subordinated bonds totaling up to 11 billion yuan. Shortly after, the board approved a private placement plan to issue up to 715 million domestic shares to specific investors and no more than 215 million H shares through a non-public offering. According to the announcement, the 715 million domestic shares represent approximately 15.28% of the total domestic shares outstanding before the issuance, with the target being up to 35 qualified domestic institutional investors. The 215 million H shares account for about 15.98% of the total H shares outstanding before the issuance, with the target being qualified investors. As of the announcement date, Jiangxi Bank's total share capital was 6.024 billion shares, comprising 4.679 billion domestic shares (77.67%) and 1.346 billion H shares (22.33%). If the private placement is fully completed, the total share capital will increase to approximately 6.954 billion shares, with domestic shares and H shares reaching 5.394 billion and 1.561 billion, respectively, adjusting the shareholding ratios to 77.56% and 22.44%. Proceeds from the offering, after deducting expenses, will be used entirely to replenish core Tier 1 capital, aiming to "improve capital adequacy ratios, optimize the equity structure, enhance risk resilience, and support the real economy."

"The dual approach of debt and equity reflects the urgent pressure Jiangxi Bank faces in capital management amid multiple overlapping challenges," said Fu Yifu, a special researcher at Suzhou Bank. He noted that the continuous decline in the core Tier 1 capital adequacy ratio is a direct trigger. As a key indicator of a bank's most high-quality capital, its persistent decline suggests that the bank's ability to generate capital internally through retained profits is weakening. When this indicator approaches regulatory thresholds, banks must take proactive measures to strengthen their capital buffer through external financing. Underlying this is the ongoing consumption of capital caused by asset quality pressures. The disposal of non-performing loans requires substantial provisioning, directly eroding current profits and limiting the space for internal capital replenishment. The profit growth rate failing to keep pace with the expansion of risk-weighted assets leads to a structural imbalance where capital is consumed faster than it is accumulated, compelling the bank to act on both debt and equity fronts. Fu explained that from a tool selection perspective, bonds replenish Tier 2 or other Tier 1 capital, while equity financing targets core Tier 1 capital. The two channels address different levels of capital gaps, illustrating the urgency and systematic approach in the bank's capital planning.

Performance Pressure and Capital Strain

Jiangxi Bank was established in December 2015 through the merger of former Nanchang Bank and Jingdezhen Commercial Bank, becoming the first provincial-level corporate bank in Jiangxi. It was listed on the Hong Kong Stock Exchange in June 2018. As of the end of 2025, the top five domestic shareholders of the bank were: Jiangxi Transportation Investment Group Co., Ltd. (15.56%), Jiangxi Financial Holding Group Co., Ltd. (5.8%), Nanchang Industrial Investment Group Co., Ltd. (4.81%), Pingxiang Huixiang Construction Development Co., Ltd. (4%), and China Tobacco Corporation Jiangxi Province Company (2.99%). Despite a stable shareholder base, Jiangxi Bank's capital quality has been under sustained pressure, with key capital adequacy ratios declining for several consecutive years. Data show that from the end of 2022 to the end of 2025, the bank's core Tier 1 capital adequacy ratio fell from 9.65% to 9.37%, 9.3%, and 8.6%; the Tier 1 capital adequacy ratio dropped from 12.82% to 12.37%, 12.31%, and 11.5%; and the total capital adequacy ratio decreased from 14% to 13.55%, 13.47%, and 12.41%, highlighting the growing urgency of capital replenishment. A 2026 rating report from Lianhe Credit Information Service indicated that Jiangxi Bank primarily relies on retained profits for capital replenishment, but its internal capital generation capacity is weak. Given the ongoing business expansion and declining profitability, the bank faces future needs for core capital replenishment. In 2025, affected by factors such as lower net interest income and returns on non-credit assets, the bank's operating revenue fell 21.89% year-on-year to 9.028 billion yuan, while net profit attributable to shareholders declined 8.74% to 965 million yuan. The profit pressure stems from high asset impairment losses continuing to erode profitability. In 2025, although the bank's asset impairment losses were 2.208 billion yuan lower than the previous year, the total provision still reached 5.169 billion yuan. From 2022 to 2025, the bank's annual asset impairment losses were 7.397 billion yuan, 6.664 billion yuan, 7.376 billion yuan, and 5.169 billion yuan, respectively, accumulating over 26 billion yuan over four years, directly compressing profit margins and weakening internal capital accumulation. The root cause of high provisioning is the persistently high non-performing loan ratio. At the end of 2021, the bank's NPL ratio was 1.47%, but it jumped sharply to 2.18% in 2022. Although it has been gradually reduced, it remained at a high level of 2% by the end of 2025. An Guangyong, an expert from the Credit Management Committee of the China Mergers and Acquisitions Association, analyzed that multiple factors, including narrowing net interest margins, high provisioning pressure, and continuous growth in risk-weighted assets, have led to Jiangxi Bank's weak internal capital accumulation capacity. Against this backdrop, the bank's simultaneous pursuit of capital replenishment through multiple channels underscores the real urgency of capital needs.

Persistently Low H-Share Price

On August 11, Jiangxi Bank's H-share price closed at 0.635 Hong Kong dollars per share. Since 2022, the stock has hovered around 0.6 Hong Kong dollars, a decline of about 90% from its 2018 IPO price of 6.39 Hong Kong dollars, and has consistently traded below book value. According to Jiangxi Bank's announcement, the par value of both domestic shares and H shares is 1 yuan per share. As stipulated by the Company Law, the issuance price of domestic shares cannot be lower than the par value, with a minimum of 1 yuan per share. If H shares are issued simultaneously with domestic shares, the H-share issuance price must be consistent with the domestic share price, adjusted by the applicable exchange rate. Fu Yifu noted that the significant decline in the H-share price from the IPO price and its prolonged trading below book value create three structural challenges for the private placement. Pricing mechanism is the first constraint. Private placements usually require a discount to the market price to attract investors, but discounted issuance implies selling equity at a lower price, resulting in a more pronounced dilution effect on existing shareholders' interests. In a governance framework dominated by state-owned capital, low-price share issuance also involves compliance reviews regarding the loss of state assets, with pricing space subject to multiple constraints. Investor willingness is the second challenge. The prolonged low share price itself reflects the market's cautious expectations about the bank's fundamentals. Finding strategic investors willing to subscribe at or near current market prices, or even at a premium, in this context raises the question of "who is willing to take the deal." The relatively weak liquidity of the H-share market, coupled with declining risk appetite among foreign institutional investors for small and mid-sized banks, further narrows the pool of potential subscribers. Approval from state-owned asset regulators and balancing shareholder interests constitute the third constraint. If the private placement involves state-owned shareholder equity, it requires multiple approvals, including from state-owned asset regulatory authorities. Proceeding with the issuance while the stock trades below book value requires both ensuring the success of fundraising to address the capital crunch and balancing the interests of existing shareholders to avoid excessive dilution. Balancing these conflicting demands is far more difficult than conducting a share issuance at market price. Regarding the proposed private placement, media reached out to Jiangxi Bank for comment, but no response had been received by the time of publication.