After nearly three months, Jiujiang Bank (6190.HK), which previously disclosed a large-scale capital increase plan, has received "strong support" from its major shareholders.

A recent announcement from Jiujiang Bank shows that the Jiujiang Municipal Finance Bureau and Industrial Bank Co., Ltd., its first and third largest shareholders respectively, have issued letters of intent agreeing to participate in the bank's capital increase plan.

Among them, the Jiujiang Municipal Finance Bureau will subscribe for an amount not exceeding 500 million yuan, accounting for no more than its direct shareholding ratio in the bank, which is approximately 12.85%; Industrial Bank Co., Ltd. intends to subscribe for a total amount not exceeding its shareholding ratio in the bank, which is approximately 10.34%.

This capital increase and expansion of shares is seen as a "capital infusion" by major shareholders under the pressure of capital replenishment. As "capillaries" serving the regional real economy, regional small and medium-sized banks have long had weaker capital levels than the industry average, and the pressure they face to replenish capital is self-evident.

In recent years, the push for capital increases and share expansions among small and medium-sized banks has continued to heat up. Against this mainstream trend, several small and medium-sized banks have also been "bucking the trend" by reducing their capital. Why is there such a "dramatic contrast" in capital adjustments among small and medium-sized banks?

Regional small and medium-sized banks have long had capital levels lower than the industry average.

Data released by the National Financial Regulatory Administration (NFRA) shows that as of the end of the third quarter of 2025, the capital adequacy ratios of city commercial banks and rural commercial banks were 12.4% and 13.2% respectively. These figures are not only lower than the average capital adequacy ratio of commercial banks, which was 15.36%, but also significantly lower than the levels of large commercial banks (17.99%) and joint-stock commercial banks (13.48%).

At the same time, however, the non-performing loan ratios of small and medium-sized banks are relatively high. According to NFRA data, the non-performing loan ratios for city commercial banks and rural commercial banks were 1.84% and 2.82% respectively, higher than the commercial bank average of 1.52%, and also higher than the levels of large commercial banks and joint-stock commercial banks (1.22%).

Against this backdrop, some regional small and medium-sized banks are facing challenges such as increasing pressure to replenish capital and weak risk management.

Taking Jiujiang Bank, which recently received a "capital infusion" from its major shareholders, as an example, its capital adequacy ratio has declined significantly since last year. Data shows that as of the end of September 2025, the bank's capital adequacy ratio on a consolidated basis was 11.21%, its tier-1 capital adequacy ratio was 11.18%, and its core tier-1 capital adequacy ratio was 8.63%, representing decreases of 1.96, 0.79, and 0.81 percentage points respectively compared to the end of 2024.

Regarding the primary purpose of this issuance, Jiujiang Bank stated in its announcement that it is to effectively replenish the bank's core tier-1 capital, substantially enhance its risk resilience, and optimize its shareholding structure.

Prior to this, in October 2025, the bank announced plans to issue no more than 860 million domestic shares and no more than 175 million H-shares to qualified subscribers. This already marks the second capital increase plan announced by Jiujiang Bank since its listing.

Jiujiang Bank also stated that the intended subscription by major shareholders for domestic shares demonstrates their positive expectations for the bank's future prospects and their support for its long-term development. This is conducive to optimizing the bank's capital structure, enhancing the core competitiveness of its main business, and creating greater value for shareholders.

The capital increase and share expansion at Jiujiang Bank is not an isolated case among small and medium-sized banks; the push for such measures has been intensifying in recent years. Just one month into 2026, several regional city commercial banks have密集 completed changes in registered capital or received regulatory approval for capital increases, some of which involve substantial capital changes.

For example, on January 4th, the Xinjiang Local Financial Regulatory Bureau under the NFRA published an approval on its official website, agreeing to increase Xinjiang Bank's registered capital from approximately 7.906 billion yuan to approximately 12.223 billion yuan, an increase of about 54.6%.

"For banks, capital increases are mostly aimed at enhancing capital strength, supporting expansion, or meeting regulatory requirements," pointed out Lou Feipeng, a researcher at Postal Savings Bank of China. He noted that the recent密集 capital increase and share expansion activities by many city and rural commercial banks reflect the proactive efforts of small and medium-sized banks to bolster their risk resilience through external capital replenishment, against the backdrop of narrowing net interest margins and weak internal capital accumulation.

While many small and medium-sized banks are increasing capital, some are "bucking the trend" by reducing it. For instance, on January 16th, the Beijing Financial Regulatory Administration agreed to a reduction of 30 million yuan in the registered capital of Beijing Mentougou Zhujiang Rural Bank. On January 19th, the Liaocheng Regulatory Branch of the NFRA agreed to a reduction of approximately 44.2102 million yuan in the registered capital of Shandong Yanggu Rural Commercial Bank.

In Lou Feipeng's view, capital reduction in small and medium-sized financial institutions mainly stems from a mismatch between capital沉淀 and business scale. Some institutions, due to historical capital injections, have registered capital far exceeding their actual credit needs, increasing compliance costs. Reducing capital can help optimize the capital structure and lower the burden, but it may weaken the capacity for risk-weighted asset deployment. Institutions reducing capital must strictly follow regulatory approval procedures, ensure their capital adequacy ratio after reduction does not fall below the regulatory minimum, protect creditors' rights, and avoid causing market misinterpretation.

"Capital reduction in small and medium-sized banks focuses on structural optimization," Lou Feipeng mentioned. Some banks are cleaning up redundant registered capital while simultaneously replenishing core capital through injections of fiscal funds, aiming to improve capital quality rather than simply reducing the total amount. This approach not only complies with regulatory requirements for capital authenticity but also enhances the stability of the local financial system.

The capital reduction method mentioned above is relatively uncommon. A recent example is Inner Mongolia Bank, which announced in November 2025 that it had received relevant approvals to adopt this model.

According to an announcement released by Inner Mongolia Bank in November 2025, the bank plans to reduce its registered capital from 8.406 billion yuan to 4.575 billion yuan through a simplified capital reduction process. This adjustment does not involve returning capital to shareholders and will not affect the bank's overall solvency. Simultaneously, this capital adjustment will be accompanied by a conversion of special bond funds into equity to supplement core tier-1 capital by 5.5 billion yuan. After the capital conversion, the registered capital will increase to 10.075 billion yuan, further solidifying Inner Mongolia Bank's capital strength.

"In the future, the trend of capital reduction among county-level banks with saturated business and sluggish regional economies may continue, but this is not a signal of systemic risk," Lou Feipeng believes. The "downsizing and fitness" of small and medium-sized banks should focus on dynamically matching capital with business scale, prioritizing internal accumulation, and promoting regional integration. Regulators should strengthen categorized guidance, support mergers and reorganizations, and guide a shift from scale expansion to quality priority, enhancing governance efficiency and the capacity to serve the real economy.

In the view of several interviewees, whether it is capital increase for expansion or capital reduction for downsizing, these are rational choices made by small and medium-sized banks based on their own development. However, it must be pointed out that for some small and medium-sized banks, the dilemma of capital replenishment still persists.

"In recent years, as interest margins have narrowed, the profit growth rate of commercial banks has slowed, weakening their ability for internal capital replenishment. Although some small and medium-sized banks have previously positively impacted income by increasing their financial investment allocations, such businesses usually exhibit high volatility and are insufficient to sustainably improve internal capital generation capabilities," a Fitch Bohua report pointed out.

Apart from capital increase and share expansion, the issuance of capital instruments such as tier-2 capital bonds and perpetual bonds is also an important means for banks to conduct external replenishment, but the issuance of such bonds is more concentrated among institutions with better qualifications.

However, in recent years, regulatory authorities have continuously emphasized preventing risks in small and medium-sized financial institutions and have accelerated the promotion of reorganization and integration among small and medium-sized banks. This includes establishing provincial-level legal entity institutions to integrate small and medium-sized banks within a region, with several such provincial-level institutions approved for operation within 2025.

Fitch Bohua believes that newly established provincial-level rural commercial banks can usually obtain relatively large-scale financial support from local governments, thereby enhancing their risk resilience. Furthermore, provincial-level legal entity banks that have completed integration are not only more resilient to risks than the previously dispersed small and medium-sized institutions but are also more likely to replenish their capital levels through public market channels, which is also conducive to maintaining long-term resilience in the capital levels of regional banking institutions.

It is worth noting that regional small and medium-sized banks are facing divergence. "Institutions located in regions with weaker economic vitality still face risks such as declining profit retention and capital erosion from risk exposure; meanwhile, regional banks in other areas with stronger resource endowments are expected to maintain overall stable capital levels."