Bank Convertible Bond-to-Stock Capitalization "First Deal" Approved This Year; Mid-to-Small Banks Seek Multi-Channel "Recapitalization"

The Water of Spring River Foresees “Debt” First.
With the latest announcement from Chengdu Bank, the first case of bond-to-equity conversion and capital increase in the banking industry in 2026 has officially “broken the ice”—this western first trillion-level city commercial bank has been approved to increase its registered capital from 3.736 billion yuan to 4.238 billion yuan. A conversion rate of 99.94% allows its 8 billion yuan convertible bonds to be smoothly converted into core Tier 1 capital to support business expansion, exemplifying the “multi-channel capital replenishment” trend among small and medium-sized banks in 2026.

According to incomplete statistics, more than 80 city commercial banks, rural commercial banks, and rural credit cooperatives have completed registered capital changes this year, most of which are capital increases. From Chengdu Bank’s bond-to-equity conversion, to Hubei Bank’s 7.614 billion yuan private placement, to Guangzhou Bank’s intensive preparations, a comprehensive “capital replenishment war” driven by both internal and external sources, with deep participation from local state-owned assets, has already begun.

Convertible Bonds “Dance” with Rights

Chengdu Bank’s Capital Increased by 13.46%

Chengdu Bank recently announced that it received approval from the Sichuan Financial Regulatory Bureau to increase its registered capital from 3.736 billion yuan to 4.238 billion yuan, a 13.46% increase. This change was triggered by the early redemption of the company’s convertible bonds, leading to capital expansion.

In March 2022, Chengdu Bank issued 8 billion yuan of A-share convertible bonds, setting a record of 7,144.29 times oversubscription online. By the end of 2024, due to the stock price reaching 130% of the conversion price for several consecutive trading days, a conditional redemption clause was triggered. As of the redemption registration date on February 5, 2025, a total of 7.995 billion yuan of “Chengdu Silver Convertible Bonds” had been converted, with a conversion rate of 99.94%, totaling over 626 million shares, accounting for 17.34% of the total pre-conversion share capital.

“For listed banks, promoting the conversion of convertible bonds is an effective way to supplement core Tier 1 capital,” said Dagong International in a research report. This method not only optimizes the asset-liability structure but also avoids the impact of direct dilution of earnings per share on the secondary market.

As the first listed bank in Sichuan, listed on the Shanghai Stock Exchange in 2018, Chengdu Bank has developed steadily in recent years. In 2023, its total assets surpassed one trillion yuan, becoming the first city commercial bank in the west with an asset scale exceeding one trillion. By the end of the third quarter of 2025, total assets had risen to 1.39 trillion yuan, with a non-performing loan ratio of only 0.68%, among the best levels for listed city commercial banks. After this “capital boost,” this western benchmark bank will further solidify its capital base and prepare for future business expansion.

It is worth noting that Chengdu Bank’s success is not an isolated case. Li Yunze, Director of the China Banking and Insurance Regulatory Commission, recently emphasized when discussing multi-channel capital replenishment: “In addition to issuing special national bonds, market-based methods can also be used to leverage more social funds, such as insurance funds, which can be studied and explored.” This policy signal opens up imagination for more small and medium-sized banks to explore diversified capital replenishment paths.

State-Owned Capital “Set the Stage” for Private Placements

Over 80 Small and Medium Banks Intensively “Replenish Blood”

If Chengdu Bank represents the path of listed banks relying on capital market tools for endogenous capital replenishment, many non-listed small and medium-sized banks choose a more direct approach—capital increases and share expansions.

Hubei Bank is a typical example since the start of 2026. In early February, the bank announced the completion of an 1.8 billion share issuance, increasing total share capital to 9.412 billion shares, raising a total of 7.614 billion yuan. After this issuance, by the end of 2025, Hubei Bank’s capital adequacy ratio increased to 12.62%, and its core Tier 1 capital adequacy ratio reached 8.96%, both significantly higher than at the end of 2024.

Notably, among the bank’s 53 legal shareholders, 35 are new state-owned legal shareholders, with only one private enterprise, highlighting the prominent role of local state assets. Similarly, after approval of the capital increase plan, Ya’an Commercial Bank’s four state-backed shareholders, including the Ya’an Economic and Technological Development Zone Financial Bureau, officially joined, helping the bank’s total share capital increase by over 73%. Xinjiang Bank’s registered capital jumped from about 7.906 billion yuan to 12.223 billion yuan, with Xinjiang Financial Investment (Group) acquiring 3.777 billion shares, holding a 30.9% stake.

“Local state-owned capital-led capital increases are a combination of ‘short-term risk mitigation + long-term reform and transformation,’” said a securities analyst in an interview. “State capital not only quickly replenishes capital and restores market confidence but also guides bank lending toward local infrastructure and key industries, creating a resonance between finance and regional development.”

Behind this round of capital increases is the urgent capital demand of small and medium-sized banks and the severe risk situation. According to data from the China Banking and Insurance Regulatory Commission, by the end of Q4 2025, the average capital adequacy ratios of city commercial banks and rural commercial banks were 12.39% and 13.18%, respectively, both below the industry average of 15.46%; non-performing loan ratios were 1.82% and 2.72%, significantly higher than the industry average of 1.50%. Some banks’ core Tier 1 capital adequacy ratios are close to regulatory red lines, making capital replenishment an inevitable choice.

From the perspective of the sources of capital increase, this round of “blood replenishment” features “wide coverage and layered levels.” Besides large-scale increases like Xinjiang Bank and Hubei Bank, which raised tens of billions, many involve fine-tuning of registered capital, such as Hebei Daxing Rural Commercial Bank and Guangxi Xilin Rural Commercial Bank, with increases only in the hundreds of thousands or millions of yuan. From the approval frequency, regulatory efforts have significantly intensified, with over 30 banks’ capital increase plans approved within just three days from January 4 to 6, covering provinces like Guangxi, Hebei, and Sichuan.

However, “blood replenishment” is not a one-time solution. Dagong International reminds that the positive effects of capital supplementation are deeply linked to the banks’ operational quality. For banks like Guangzhou Bank, which are still in IPO processes or have adjusted their listing strategies, whether they can leverage capital advantages to achieve business transformation and improve profitability remains a fundamental challenge. In an industry with narrowing interest margins and pressure on asset quality, small and medium-sized banks must excel both internally and externally to remain competitive.