Commercial Banks Issue Record 1.73 Trillion Yuan in Bonds This Year, ABC Leads with Over 300 Billion

As the year draws to a close, another bank has been approved to issue Tier 2 capital bonds. On December 16, Ruifeng Bank announced that it recently received approval to issue up to 2.5 billion yuan in Tier 2 capital bonds. The bank will independently decide the timing, batches, and size of the issuance within the approved quota and complete it within 24 months of approval.

This year, commercial banks' demand for capital replenishment remains strong. According to statistics from Enterprise Early Warning, as of December 17, commercial banks have issued a combined 1.73 trillion yuan in Tier 2 capital bonds and perpetual bonds (collectively referred to as "Tier 2 and perpetual bonds"), setting a historical record.

Notably, Agricultural Bank Of China Limited (ABC) has been one of the most active issuers this year, with its Tier 2 and perpetual bond issuance exceeding 300 billion yuan, ranking first.

From a demand perspective, the overall favorable market interest rate environment has reduced financing costs for banks. Additionally, a large volume of existing bonds has entered redemption periods, driving banks' demand to "roll over" high-cost debt through new issuances, collectively supporting the record issuance volume.

Industry experts suggest that while major state-owned banks currently maintain high capital adequacy ratios and have recently completed capital injections in 2025, reducing their need for additional capital, joint-stock banks and regional banks have seen declining capital adequacy ratios this year. If interest rates remain low next year and the bond market stays favorable, smaller banks may continue to increase supply.

ABC's bond issuance exceeded 300 billion yuan this year, while joint-stock and rural commercial banks saw declines in issuance volume. According to Enterprise Early Warning, as of December 17, commercial banks' Tier 2 and perpetual bond issuance for 2025 totaled 1.73 trillion yuan, a record high. Of this, Tier 2 capital bonds accounted for 910.82 billion yuan, and perpetual bonds for 821.8 billion yuan.

ABC was the largest issuer, with total Tier 2 and perpetual bond issuance reaching 305 billion yuan. On November 20, ABC announced the completion of its 2025 Tier 2 capital bond (Phase IV) issuance, totaling 35 billion yuan across two tranches. Tranche 1, a 10-year fixed-rate bond, raised 32 billion yuan with a coupon rate of 2.14%, redeemable after five years. Tranche 2, a 15-year fixed-rate bond, raised 3 billion yuan with a coupon rate of 2.40%, redeemable after ten years. This brought ABC's Tier 2 capital bond issuance for the year to 215 billion yuan, supplemented by perpetual bond issuances of 50 billion yuan in May and 40 billion yuan in October.

State-owned and joint-stock banks remained the primary issuers, though joint-stock banks' issuance volume declined year-over-year. Wind data shows that as of December 17, six state-owned banks issued a combined 910 billion yuan in Tier 2 and perpetual bonds, up 12.9% year-over-year, while 11 joint-stock banks issued 454 billion yuan, down 13.69%.

Among smaller banks, city commercial banks saw increases in both the number of issuers and issuance volume, with 52 banks issuing 291.3 billion yuan, up from 39 banks and 241 billion yuan last year. Jiangsu Bank led with 30 billion yuan in issuance, followed by ten others, including Hangzhou Bank and Bank of Beijing, each issuing over 10 billion yuan. In contrast, rural commercial banks issued only 28.76 billion yuan, down 40.64% year-over-year.

Huaxi Securities noted that while most smaller banks face limited capital replenishment pressure, joint-stock and regional banks are sensitive to issuance costs and bond market conditions. This year's weaker bond market and reduced demand for long-duration instruments have made issuance more challenging for smaller banks, dampening their willingness to issue.

Looking ahead to next year, issuance volume is expected to remain stable, with smaller banks likely increasing supply. The latest data from the Financial Regulatory Authority shows that as of Q3 2025, commercial banks' capital adequacy ratios averaged 15.36%, down 0.38 percentage points from the start of the year. State-owned banks maintained a high ratio of 17.99%, while city commercial banks, rural commercial banks, and private banks lagged at 12.40%, 13.20%, and 12.14%, respectively.

Shenwan Hongyuan Securities predicts that as regulatory policies encourage stable capital replenishment, state-owned banks with higher capital buffers may reduce issuance, while smaller banks, facing limited options and lower capital adequacy, will continue to rely on Tier 2 and perpetual bonds. With many bonds entering call periods, the market may shift from rapid growth to maturity.

Since December, regulators have approved Tier 2 and perpetual bond issuance plans for four banks, including Huishang Bank and Chongqing Bank, with Huishang Bank receiving the highest quota of 15 billion yuan.

Experts anticipate that next year's issuance will remain steady but structurally differentiated. State-owned banks may pivot to innovative instruments like TLAC bonds, reducing reliance on Tier 2 and perpetual bonds, while smaller banks, driven by capital adequacy pressures, will remain active issuers, optimizing structures to enhance market acceptance.