In response to Beijing’s recent commitment to support the economy through substantial banking sector support, four of China’s largest state-owned banks have disclosed plans to secure a combined CNY 520 billion ($71.60 billion) via private placements.
This ambitious capital infusion aims to enhance the banks’ core tier-1 capital, aligning with the government’s broader strategy to recapitalise major state banks to the tune of CNY 500 billion.
According to the Sunday filings, Bank of China intends to collect up to CNY 165 billion, while China Construction Bank targets CNY 105 billion through these placements.
Bank of Communications is aiming for a capital raise of CNY 120 billion, and Postal Savings Bank of China plans to gather CNY 130 billion.
Notably, these capital drives are supported by China’s finance ministry, a significant stakeholder in all four banks, with plans for the ministry to become the controlling shareholder of Bank of Communications post-issuance.
The financial maneuvers come amid a backdrop of stagnating profits and narrowing margins for China’s top banks, as they grapple with an economic slowdown and a weakened property sector.
Analysts have emphasized the need for rapid capitalization to enable these institutions to increase lending and stabilize growth, while also managing the strains on asset quality.
These developments occur as China grapples with the potential impacts of interest rate cuts, which may further compress bank profitability. Given the economic headwinds, including a property market crisis and the specter of deflation, the government has maintained its economic growth target at around 5% for the year, promising additional fiscal measures to mitigate deflationary risks and counterbalance tariffs from the United States.
