Say goodbye to IPO queues; capital increase and share expansion at Guangzhou Bank is the best solution?

Listing | Zhongfang.com

Review | Li Xiaoyan

In the context of increasing capital replenishment needs for small and medium-sized banks and a steady pace of A-share listings, Guangzhou Bank recently announced plans to initiate capital increase and share expansion. The bank is also conducting competitive negotiations for legal services, asset valuation, financial advisory, accounting firms, and other intermediary services. As a leading city commercial bank with an asset scale approaching 912.1 billion yuan, this capital expansion is both a practical move to align with regulatory guidance and strengthen capital, and a strategic choice to optimize the equity structure and focus on core business development. It demonstrates the bank’s long-term commitment to serving Guangzhou, supporting the Bay Area, and maintaining steady operations.

Guangzhou Bank’s development history is a typical example of reform and growth among Chinese city commercial banks. It was formed by merging 46 urban credit cooperatives and was initially named Guangzhou Urban Cooperative Bank. In 2009, it officially renamed to Guangzhou Bank, entering a fast track of scaled and standardized development. Since its founding, aside from dividend distributions, the bank has completed seven rounds of capital increase and share expansion (including rights issues). Between 2005 and 2008, three rounds of capital increase raised the total share capital from 2 billion to 8.3 billion shares, laying the foundation for scale expansion. In 2018, it completed a billion-yuan-level capital increase, issuing 3.474 billion shares, attracting six high-quality institutional investors including China Southern Power Grid, and simultaneously optimized the equity structure. The major shareholder, Guangzhou Financial Holdings, transferred part of its holdings, further improving governance. This recent capital increase and share expansion is the second since the bank’s renaming in 2009 and a key step in addressing capital shortfalls and activating growth momentum in the new era.

Capital is the “safety cushion” for bank operations and the “confidence” to serve the real economy. For Guangzhou Bank, the core goal of this capital increase is to replenish core Tier 1 capital and improve capital adequacy, which is both timely and urgent. Data shows that from 2021 to 2024, the bank’s core Tier 1 capital adequacy ratio has remained above 9.1%, indicating robust risk resistance; however, by the end of September 2025, this ratio declined to 7.73%, showing a significant drop. The reasons include steady asset expansion from 854.8 billion to about 912.1 billion yuan, with risk-weighted assets rising above 610 billion yuan, leading to increased capital consumption. Additionally, under the pressure of narrowing net interest margins industry-wide and limited internal capital replenishment space relying on retained earnings, the bank faces challenges in maintaining capital levels.

From a regulatory perspective, according to the “Commercial Bank Capital Management Measures,” China’s minimum requirement for core Tier 1 capital adequacy ratio is 5%. After accounting for reserve capital and other requirements, high-quality city commercial banks need to maintain a more ample capital buffer. Guangzhou Bank’s current ratio of 7.73% exceeds the regulatory minimum but still has room for improvement to reach a more prudent industry level. This capital increase will directly supplement core Tier 1 capital, effectively easing capital constraints, strengthening risk defenses, and opening up space for credit expansion and business innovation. It will also provide solid capital support for reaching a trillion-yuan asset scale and serving the Guangdong-Hong Kong-Macao Greater Bay Area.

Regarding ownership structure, Guangzhou Bank has a solid governance foundation, ensuring smooth progress of the capital increase. Currently, the bank’s total share capital is about 11.78 billion shares, with Guangzhou Financial Holdings directly and indirectly holding 42.3%, as the controlling shareholder. Other major shareholders include Guangyong State-owned Assets (19.71%), China Southern Power Grid (16.94%), and China Southern Airlines Group (12.68%), forming a diversified ownership pattern led by local state-owned capital and supported by high-quality state-owned enterprises. Deep participation of state capital provides a stable operating foundation and reinforces the bank’s responsibility to serve local strategies and support the real economy. This capital increase will further optimize the ownership structure, maintaining the state-controlled position while potentially attracting more long-term investors aligned with development strategies, improving corporate governance, and creating a positive interaction between shareholder value and bank development.

Looking back at the path of capital markets, Guangzhou Bank’s choices are more rational and pragmatic. Since its renaming, the bank has set a goal to go public. After optimizing its equity structure in 2018, the listing process accelerated, with filing for guidance completed in 2019, and joining the A-share queue in 2020. In March 2023, it received approval from the Shenzhen Stock Exchange for registration-based review. However, in January 2025, the bank proactively withdrew its IPO application due to strategic adjustments, becoming the sixth small and medium-sized bank to withdraw an A-share listing application since the implementation of the registration system in 2023. Market consensus generally views this as not abandoning the capital market but making a cautious choice based on industry conditions and its own development stage—delaying listing to focus on capital increase and consolidation, avoiding resource consumption from long queues, and strengthening capital and operational foundation for a more robust future listing. The bank has also clarified that it currently has no plans to list in Hong Kong, remaining committed to domestic development and regional finance.

From an industry perspective, the withdrawal of IPO applications by small and medium-sized banks and shifting toward capital increase and share expansion has become a phased trend. Currently, only five banks are still in the A-share queue. Most small and medium-sized banks prefer to raise capital through targeted issuance, introducing state-owned capital, or share expansion. This “strengthening internal capabilities and slowing pace” approach aligns with regulatory guidance emphasizing “focusing on core businesses, risk prevention, and serving local areas.” Guangzhou Bank’s actions reflect this industry trend and a return to the essence of finance: not blindly pursuing the glamour of listing but using capital replenishment to strengthen risk management and improve service capacity, charting a high-quality development path suited to its own circumstances.

Objectively, Guangzhou Bank still faces phased challenges such as capital pressure and profit growth. The decline in core Tier 1 capital adequacy ratio, balancing asset expansion with capital consumption, remains a key issue for future operations. However, these are routine challenges in the scale development of city commercial banks and not fundamental risks. This capital increase and share expansion precisely target these issues, providing external capital to quickly improve capital adequacy and buy time and space for business transformation and profit recovery.

In the future, as the capital increase and share expansion are implemented, Guangzhou Bank will face three major development opportunities: first, significantly strengthening capital strength, with core Tier 1 capital adequacy ratio steadily rising to meet regulatory requirements and leaving room for growth, elevating risk resistance; second, enhancing service capabilities—after easing capital constraints, increasing support for key projects in Guangzhou and the Greater Bay Area, small and micro enterprises, green finance, and innovation finance, fulfilling the responsibilities of a regional bank; third, consolidating its development foundation, continuously optimizing ownership structure, improving corporate governance, and building a solid base for reaching a trillion-yuan asset scale and achieving long-term steady growth.

As an important city commercial bank in South China, Guangzhou Bank’s capital increase and share expansion is not only a key step for its own development but also a demonstration for regional financial stability and the transformation of small and medium-sized banks. With strong support from local state-owned capital and synergistic empowerment from high-quality shareholders, the bank is expected to overcome development bottlenecks and activate endogenous momentum through this capital operation, progressing from “almost trillion” to “trillion-level,” becoming a leading financial force supporting the construction of the Guangdong-Hong Kong-Macao Greater Bay Area.

Financial stability leads to economic stability; strong capital makes finance stronger. Guangzhou Bank, taking this capital increase as an opportunity, abandons impatience, focuses on its core business, and seeks development through steady progress and strategic breakthroughs. This is both the responsibility of a leading city commercial bank and the right path for high-quality development of small and medium-sized banks. In the future, with capital replenishment in place and operational efficiency improved, Guangzhou Bank will be better equipped and more resilient, rooted in Lingnan and serving the Bay Area.