Ask AI · Over 80 Banks Seeking Capital Reflects Industry Polarization?

The banking industry is undergoing a brutal reshuffle.

As 12 listed banks take the lead in disclosing their preliminary performance reports for 2025, a stark picture of polarization emerges—some are taking off, some are barely holding on, and some are falling behind. This is no longer an era of industry-wide gains; it is a “structural era” where regional, customer, and existing capacity determine survival.

As the annual report disclosure season unfolds, more key information is coming to light: CITIC Bank, Ping An Bank, and other joint-stock banks have just submitted their reports, and the data confirms previous predictions;

Meanwhile, a wave of capital increases among small and medium-sized banks is accelerating, with over 80 banks lining up for capital injections, including Chengdu Bank and Jiujiang Bank.

This article dissects their real situations by categorizing them into joint-stock banks, city commercial banks, and rural commercial banks.

01. Joint-stock Banks: The Benefits of National Licenses Are Rapidly Depreciating

Joint-stock banks were once the most glamorous group in the banking industry.

With a national presence, comprehensive financial licenses, and market-oriented mechanisms, they made a fortune during the upcycles. However, the data for 2025 tells us: this license is depreciating, and it’s happening quickly.

Shanghai Pudong Development Bank: Taking Off, But Don’t Celebrate Too Soon

Pudong’s turnaround is the most impressive—profit growth of 10.52%, standing out among joint-stock banks. But seasoned investors know how tough this company has had it in recent years. The heavy burden of bad assets from earlier expansive growth has suffocated them, leading to massive impairment provisions from 2020 to 2023, causing profits to leak like a sieve.

The current rebound is essentially a cyclical logic of “navigating risks and building a bottom.” The growth of new bad loans is slowing, existing risks are being cleared, and the excess provisions accumulated before have turned into a reservoir for profit adjustment. By the end of 2025, the non-performing loan ratio dropped to 1.26%, and the provision coverage ratio rose to 200.72%, making the financials look good on paper.

But here’s the question: Is this profit release one-off or sustainable?

Looking closely at the revenue structure, amid a backdrop of pressure on interest margins, how long can profit be supported through provisioning? A deeper change is the strategic contraction—Pudong has elevated the “Yangtze River Delta Integration Demonstration Zone Management Headquarters” and is implementing a blacklist and whitelist customer exit strategy, planning to improve asset quality over 3-5 years. Translated into plain language:

Abandoning national expansion, retreating to the Yangtze River Delta to rely on old resources.

Is this move right? In the short term, regional Beta is indeed strong; in the long term, the positioning of national banks increasingly resembles that of regional banks, and the valuation logic needs to be reassessed. Investors need to think clearly: Are you buying a “growth stock emerging from difficulties” or a “cyclical stock at its peak”?

China Merchants Bank: King of Retail, but the Crown Is Heavy

In stark contrast to Pudong’s brilliance is the dull performance of China Merchants Bank—profit growth has shrunk to 1.21%, trailing among joint-stock banks. This would have been unimaginable five years ago. Back then, the “King of Retail” label allowed China Merchants Bank to enjoy valuation premiums, with its price-to-book ratio consistently higher than its peers.

What has happened now? The answer lies in the inventory washout of retail assets.

Credit cards and consumer loans surged in previous years, but now the non-performing loan ratio is rising, and the willingness of residents to leverage is plummeting amid fluctuating income expectations. China Merchants Bank has been forced to actively reduce high-risk exposures and intensify collection efforts. Wealth management business saw some recovery in the fourth quarter along with the stock market, but whether commission income can continue to warm up after the base effect from lowered fund and insurance rates depends on the A-share market.

The predicament of China Merchants Bank represents a commonality among a type of joint-stock bank: relying on retail differentiation to build a brand in earlier years, now facing retail risk exposure, and lacking a moat in corporate banking, leaving them unsupported on both ends. A profit growth of 1.21% may just be a prelude to the new normal.

CITIC Bank and Ping An Bank: What Did Their Recent Reports Validate?

As the annual report disclosure season progresses, CITIC Bank and Ping An Bank have just submitted their reports, and the data basically confirms previous judgments.

CITIC Bank’s net profit attributable to shareholders for 2025 grew by 2.98%, with revenue growth at -0.5%, continuing a “moderate” tone.

What does this report indicate? Corporate banking has group synergy advantages, but the marketization level is insufficient; retail banking has a presence, but brand recognition does not match that of China Merchants Bank. In a context of existing competition, banks lacking distinctive labels are forgotten by clients and overlooked by investors, leading to valuation discounts as fate. CITIC’s growth of 2.98% may represent the long-term fate of such “intermediate status” banks.

Ping An Bank’s data is even more intriguing. As an aggressive player in retail transformation, Ping An Bank heavily invested in consumer finance and auto finance in previous years and is now undergoing a painful adjustment period.

The 2025 performance shows its retail non-performing loan ratio is still climbing, forcing a significant reduction of high-risk exposures, putting pressure on profit growth. This mirrors the plight of China Merchants Bank: retail transformation is not a cure-all; when the deleveraging cycle for households arrives, the more aggressive the previous expansion, the more painful the subsequent adjustments.

The overall trend for joint-stock banks is clear: contracting toward high-growth regions, seeking benefits from historical assets, and looking for incremental growth in underserved markets. The era of national license benefits is over; those who can survive in the future will either be “regionalized deep-dive” pseudo-national banks or a few “truly versatile” but yet-to-be-validated minorities. The intermediate status is the most dangerous.

02. City Commercial Banks: The Last Fling of Regional Benefits, but the Window Is Closing

If joint-stock banks are contracting, city commercial banks are expanding—at least in terms of performance. Qingdao Bank leads with a profit growth of 21.66%, followed closely by Qilu Bank at 14.58%, Hangzhou Bank at 12.05%, Ningbo Bank at 8.13%, and Nanjing Bank at 8.08%, collectively basking in the spotlight of the Yangtze River Delta and Shandong.

But don’t rush to conclusions. Behind these numbers, is this the last realization of regional benefits or proof of sustainable capability? We need to dissect them one by one.

Qingdao Bank and Qilu Bank: Capitalizing on Shandong, But for How Long?

The high growth of these two Shandong-based banks is built on solid regional economies. Shandong’s GDP will surpass 10 trillion in 2025, growing at 5.5%, becoming the first member of the “ten trillion club” in the north. The industrial upgrades, infrastructure investments, and manufacturing expansions in Qingdao and Jinan provide a continuous credit demand for local banks.

More critically, there’s pricing power. City commercial banks deeply engage with locals, possessing “soft information” advantages regarding regional industrial structures and customer risks, allowing them to use differentiated pricing to cover long-tail clients that larger banks are unwilling to touch. Qilu Bank focuses on county-level finance as its core engine, with county-level loan growth consistently outpacing the entire bank; Qingdao Bank’s non-performing loan ratio has decreased by 13 basis points, the largest drop, indicating that the risk control model has been effectively implemented in the region.

But alarms are ringing. Credit growth in Shandong is at 8.9%, though still high, the large banks are closing in. China Construction Bank and Industrial and Commercial Bank are launching price wars against provincial state-owned enterprises and high-quality urban investment projects in Shandong, leveraging their lower funding costs. For the same clients, if larger banks can quote 50 basis points lower and still turn a profit, will city commercial banks follow suit?

If they do, their margins will be squeezed; if they don’t, they will lose customers. The regional beta benefits are being systematically diluted, and the time window may only be 1-2 years.

Hangzhou Bank, Ningbo Bank, and Nanjing Bank: The Fine Game in the Yangtze River Delta

These three banks share a similar logic: backed by China’s most dynamic economic hub, specializing in niche enterprises, semiconductors, and the biopharmaceutical supply chain, providing high-demand credit. Hangzhou’s digital economy, Ningbo’s champion clusters, and Nanjing’s tech startups are all differentiated assets that larger banks’ standardized risk control models struggle to cover.

However, the differentiation is widening. Hangzhou Bank’s profit growth is 12.05%, Ningbo Bank’s is 8.13%, and Nanjing Bank’s is 8.08%, with the gap increasing.

Hangzhou Bank’s secret lies in grid marketing—deeply integrating into local micro and small enterprises’ supply chains, transforming long-tail clients that larger banks overlook into quality assets. Ningbo Bank relies on “five major tracks” for corporate engagement, but the market is concerned about its excessive dependence on corporate banking and the need to shore up its retail weaknesses. Nanjing Bank’s slowing growth may reflect intensifying competition within Jiangsu Province, with Su Nong Bank and Jiangsu Bank all vying for market share.

The common challenge for city commercial banks in the Yangtze River Delta is: as regional economic growth slows, credit demand shifts from “outstripping supply” to “structural scarcity,” making price wars inevitable. They can still maintain margins through meticulous operations now, but what about in two years?

Chengdu Bank and Jiujiang Bank: Samples in the Wave of Capital Increases

On the other side of performance polarization, a wave of capital increases among small and medium-sized banks is accelerating. According to regulatory disclosures, over 80 banks have initiated capital increases since 2025, with Chengdu Bank and Jiujiang Bank taking action. What signal does this send?

Chengdu Bank’s capital increase belongs to the “stronger getting stronger” logic—clear regional advantages, robust credit demand, proactively seeking capital under capital adequacy constraints to prepare for the next expansion. The market is willing to buy into capital increases from such banks, and their stock prices often respond positively.

Jiujiang Bank’s capital increase, however, is a reflection of “passive survival”—asset quality is under pressure, and the capital adequacy ratio is approaching regulatory limits, risking operational restrictions if not supplemented. Capital increases from such banks often accompany old shareholders reducing holdings and new shareholders being cautious, leading to significant valuation discounts.

The collective action of over 80 banks indicates that capital constraints among small and medium-sized banks are becoming widespread. The era where profits alone could maintain capital adequacy is over; now, frequent market solicitations are required. The deeper reasons behind this are: first, the speed of asset expansion has outpaced profit accumulation; second, deteriorating asset quality erodes capital; third, regulatory capital requirements for systemically important banks have increased.

For investors, the wave of capital increases serves as a filter: banks that can successfully increase capital and have reasonable valuations indicate market recognition of their regional advantages and asset quality; banks facing difficulties in capital increases or suffering significant valuation discounts may have already been marked for failure.

Overall Judgment on City Commercial Banks: 2025 Is the Last Fling of Regional Benefits.

In the next two years, banks like Qilu and Hangzhou must either “fully capitalize on the region” and establish local risk pricing moats or be crushed by larger banks, becoming mediocre. The ability to undertake capital increases is becoming a key metric distinguishing those who will survive from those who will not.

03. Rural Commercial Banks: Surviving in the Gaps, Polarization to the Extreme

There are too few samples of rural commercial banks, as currently only Su Nong Bank has disclosed its performance, showing a profit growth of 5.04% and a reduction in the non-performing loan ratio to 0.88%. But this one sample is enough to reflect the survival dilemmas of the entire group—and the breakout paths of the very few survivors.

Su Nong Bank: A Survivor of Grid Marketing

Su Nong Bank’s highlight comes from its “grid marketing” strategy—deeply engaging with local textile and equipment manufacturing supply chains to accurately grasp the real operating conditions of enterprises. This “human and geographical” advantage is the hardest barrier to replicate during the downward movement of larger banks.

However, the overall situation for rural commercial banks is more perilous than that of city commercial banks. Larger banks leverage their funding cost advantages to carry out “dimensional attacks” in county markets. At the same loan rates, larger banks can profit while rural commercial banks incur losses. Su Nong Bank thrives because the textile and equipment manufacturing sectors in the Wujiang area are sufficiently developed, with strong credit demand and manageable risks.

What about rural commercial banks in areas with declining industries? The story is completely different.

Weak Regional Rural Commercial Banks: From “Small and Beautiful” to “Unable to Survive”

Many rural commercial banks that have not disclosed performance, especially those in Northeast, Central and Western China, and resource-depleted areas, are experiencing survival crises. Shrinking credit demand, population outflow, and hollowed-out industries have turned the positioning of “serving agriculture and small enterprises” into an empty slogan.

The defensive strategies of these institutions are extremely pragmatic: completely abandoning the fantasy of being universal banks, only serving the remaining distinctive local industries; extreme cost reduction by lowering high-cost deposits and cutting inefficient branches; banding together for warmth, provincial associations deepening reforms, forming unified legal entities for grassroots banks, using larger balance sheets to hedge against local risks.

But this defense is merely passive resistance. The essence of “reducing quantity and improving quality” is acknowledging that individual rural commercial banks can no longer survive independently and can only delay demise through administrative restructuring. The folding of banking formats is most brutally reflected in the rural commercial bank group: either being merged or surviving in specific niches, with no third option.

Notably, among the over 80 banks seeking capital increases, the proportion of rural commercial banks is not low. However, unlike city commercial banks, capital increases for rural commercial banks are often accompanied by stricter conditions—local government injections, significant dilution for old shareholders, and even triggering changes in control. This reflects the market’s overall caution toward the rural commercial bank group: it’s not that they can’t invest, but they need to consider the region, the industry, and whether there’s any value in being merged.

04. Conclusion

Putting the three types of banks together, the “structural era” of the banking industry has arrived. Several brutal realities need to be faced.

Net interest margins are still bleeding, just at a slower rate. Deposit rates have dropped faster than the LPR, temporarily supporting the bottom, but the downward trend in asset yields is the big picture, while funding costs remain rigid. The interest margin defense is a protracted battle; don’t expect a V-shaped reversal; stabilizing in an L-shape will be a victory.

Asset quality polarization is intensifying. Corporate banking is improving, and risks in government credit and real estate have passed their peaks; however, retail is still struggling, with the non-performing loan ratios of credit cards, consumer loans, and business loans continuing to rise, making it difficult to see a turning point in 2025-2026. Moreover, be wary of banks with “recovering” provision coverage ratios—many are merely living off old reserves, using excess provisions to support profits, which is one-off and unsustainable.

The wave of capital replenishment serves as a filter, not a boon. The fact that over 80 banks are lining up for capital injections indicates that the previous growth models can no longer be sustained. In the past, expansion could be achieved through profit retention; now, they must reach out to the market.

Behind this are two brutal realities: either asset expansion has depleted capital too quickly, or deteriorating asset quality has eroded capital adequacy ratios. Banks that can successfully increase capital and maintain valuations are still recognized by the market; those facing difficulties in capital increases or experiencing significant valuation discounts have essentially been marked for failure.

High profit growth does not equate to good quality; the key is the source. Pudong’s 10.52% is from provision releases, Qingdao Bank’s 21.66% is at the end of regional benefits, and Ping An Bank struggles amidst contraction—these numbers reflect entirely different cyclical positions and risk exposures.

Only China Merchants Bank’s lowly 1.21% may be a preview of the new normal: devoid of cyclical benefits, accounting adjustments, or regional protections, relying solely on genuine operational capabilities to hold on.

The investment advice boils down to two points. First, city and rural commercial banks that are strong and capable of capital replenishment—Jiangsu, Shanghai, Chengdu, Shandong, Fujian, ranked in that order of priority; second, high-dividend large banks like Agricultural Bank of China, China Construction Bank, and Industrial and Commercial Bank, as well as joint-stock banks like China Merchants Bank, Industrial Bank, and CITIC Bank. But all should lower yield expectations—the banking sector has shifted from “pro-cyclical” to “weak-cyclical,” earning money from structural differentiation rather than industry-wide gains.

Author’s Note: Content cited from external media.