Guangdong Province's five city commercial banks—Bank of Guangzhou, Bank of Dongguan, Guangdong Huaxing Bank, China Resources Bank of Guangdong, and Guangdong Nanyue Bank—have all released their semi-annual data for 2026. As of the end of June, the combined total assets of these five lenders reached 2.96 trillion yuan, marking a year-on-year increase of roughly 3.8% and reflecting a steady but moderate expansion trend. Despite the overall asset growth, a notable red flag has emerged: capital adequacy ratios at all five institutions declined during the reporting period.
Interestingly, financial data disclosed by ST Chenming, the second-largest shareholder of Nanyue Bank, reveals that this lender experienced a contraction in both its asset and liability scales during the first half of the year. Based on the annual reports published from 2023 through 2025, however, both assets and liabilities at Nanyue Bank had actually shown consistent growth in each of those years. Additionally, the latest 2025 annual report lists a different total asset figure for 2024 compared to what the 2024 annual report originally stated, with a discrepancy of approximately 2.189 billion yuan.
As of June 30, 2026, Guangdong Huaxing Bank's capital adequacy ratio fell by 1.33 percentage points year-on-year to 12.36%, one of the sharpest declines among the provincial city commercial banks, though the figure still remains above the regulatory minimum. The bank's second-quarter information disclosure report did not provide a detailed breakdown of its operating revenue. However, data from its official website indicates that revenues for 2023, 2024, and 2025 were 8.409 billion yuan, 8.367 billion yuan, and 7.351 billion yuan respectively, demonstrating a clearly downward trajectory. Attempts to reach Nanyue Bank and Huaxing Bank through their disclosed email addresses and board office contacts were unsuccessful, with no responses received by the time of publication.
In terms of asset scale, the five banks present a pattern of "four rising and one falling." Bank of Guangzhou continues to lead with total assets of 960.937 billion yuan, up 5.67% year-on-year. Bank of Dongguan is approaching the 700-billion-yuan milestone, reporting total assets of 699.628 billion yuan, an increase of 22.627 billion yuan. Guangdong Huaxing Bank and China Resources Bank of Guangdong recorded total assets of 511.862 billion yuan and 480.089 billion yuan, reflecting growth of 5.12% and 6.46% respectively.
Guangdong Nanyue Bank stands out as the only institution with negative asset growth. Unlike the other four banks that publish semi-annual information reports, Nanyue Bank's official website indicates it discloses pillar III information on a quarterly basis, yet without detailed data on assets, liabilities, revenue, or net profit. According to the financial figures disclosed by listed company ST Chenming, Nanyue Bank's total assets had shrunk to 308.948 billion yuan by the end of June, down 5.93% from the same period last year, while total liabilities fell 5.85% to 280.428 billion yuan. This contrasts with the bank's own annual report data, which showed total assets of 306.298 billion yuan, 332.676 billion yuan, and 337.576 billion yuan at the end of 2023, 2024, and 2025 respectively, indicating continuous growth without any previous signs of balance sheet reduction. Inquiries about the reasons behind this contraction and plans for the second half of the year received no response from the bank.
Revenue figures for the first half show slight divergence in operational performance among the three banks that disclosed data. Bank of Guangzhou generated operating revenue of 6.918 billion yuan, up 216 million yuan year-on-year. Bank of Dongguan reported revenue of 4.932 billion yuan. Meanwhile, data from ST Chenming indicates that Guangdong Nanyue Bank's operating revenue declined sharply by 183 million yuan, or 12.98%, to 1.227 billion yuan. Notably, Guangdong Huaxing Bank's quarterly report lacked operating data for the first half, with no matching information found on Wind either. Given the bank's declining revenue trend from 2023 to 2025, inquiries about its current performance were also left unanswered.
While asset expansion and revenue fluctuations might be interpreted as structural divergence, the universal decline in capital adequacy ratios emerges as the most cautionary common signal from these mid-year reports. Data shows that both capital adequacy ratios and core Tier 1 capital adequacy ratios fell year-on-year across all five banks, with only Bank of Guangzhou managing to raise its Tier 1 capital adequacy ratio. Specifically, Guangdong Nanyue Bank saw its capital adequacy ratio plummet from 13.27% to 11.58%, a drop of 1.69 percentage points. Guangdong Huaxing Bank fell 1.33 percentage points to 12.36%, while Bank of Dongguan slipped to 11.87%. China Resources Bank of Guangdong declined 0.76 percentage points to 12.36%, and Bank of Guangzhou registered the smallest decrease of 0.16 percentage points, ending at 11.88%.
Regarding core Tier 1 capital adequacy, Guangdong Nanyue Bank again posted the largest drop, falling from 13.27% to 11.58%. Bank of Guangzhou holds the lowest core Tier 1 ratio at 7.76%, down a marginal 0.14 percentage points. China Resources Bank of Guangdong saw a decrease from 9.74% to 8.61%, reflecting a 1.13 percentage point decline, while Guangdong Huaxing Bank fell 0.45 percentage points and Bank of Dongguan slipped 0.12 percentage points to 9.12%.
On the Tier 1 capital front, only Bank of Guangzhou saw an improvement, rising 0.53 percentage points to 9.25%, whereas the other four banks all experienced declines. Zeng Gang, President of the Tianfu Liyan Financial Research Institute, explains that the widespread decline in small and medium-sized banks' capital adequacy reflects a broader industry phenomenon rather than an isolated issue. He attributes this to the ongoing compression of net interest margins, slower profit growth, weakened internal capital generation capabilities, and the simultaneous growth of risk-weighted assets alongside credit expansion. Additionally, these banks face limited external financing channels, as issuing perpetual bonds or Tier 2 capital bonds is constrained by credit ratings and market acceptance, making capital replenishment less flexible compared to national banks.
Zeng suggests that small and medium-sized banks should prioritize internal capital accumulation capacity over simply pursuing scale expansion to maintain market share and short-term profits. He advises optimizing asset structures to reduce high-risk weight assets, developing capital-light businesses such as intermediary services and wealth management, and broadening capital replenishment channels while improving corporate governance and risk pricing capabilities. The focus, he emphasizes, should be on enhancing profitability quality rather than chasing pure scale. On the regulatory side, he calls for differentiated capital supervision arrangements that account for regional economic characteristics, avoiding a one-size-fits-all approach that could unduly restrict these banks' normal operational development.
Despite the across-the-board declines, all five banks maintain capital adequacy ratios above regulatory minimums. Under the Commercial Bank Capital Management Measures, banks must hold a minimum core Tier 1 capital adequacy ratio of 5%, Tier 1 capital adequacy ratio of 6%, and total capital adequacy ratio of 8%. The regulations also require banks to maintain reserve capital equal to 2.5% of risk-weighted assets, which must be satisfied by core Tier 1 capital. For context, data from the National Financial Regulatory Administration shows that as of the end of the second quarter, commercial banks (excluding foreign bank branches) posted an average capital adequacy ratio of 15.26%, a Tier 1 capital adequacy ratio of 12.12%, and a core Tier 1 capital adequacy ratio of 10.72%.
Is there an inevitable connection between asset expansion and declining capital adequacy ratios? Zeng argues that the two do not necessarily have an inverse relationship. However, he cautions that when capital replenishment lags behind the growth of risk-weighted assets, it is indeed common to observe simultaneous scale expansion and declining capital adequacy. He points out that the denominator of the capital adequacy ratio is not total assets but risk-weighted assets. If a bank's new loans, investments, or off-balance-sheet activities carry higher risk weights, or if deteriorating asset quality increases risk exposure, even modest total asset growth can quickly deplete capital. In the case of these five Guangdong banks, total assets grew by approximately 3.8% year-on-year while capital adequacy ratios fell by an average of 1.16 percentage points, suggesting that capital growth has likely lagged behind risk-weighted asset growth, or that profit retention has been constrained by narrowing margins and increased provisioning requirements. Conversely, if the expansion involves low-risk-weight assets, or if banks simultaneously complete capital increases or bond issuance while improving profitability and asset quality, asset growth can coexist with stable or even rising capital adequacy ratios. The key, therefore, lies not in whether to expand, but in whether the expansion structure, risk weights, capital replenishment pace, and operational quality can be properly aligned.
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