The Big Four banks are taking the lead as a wave of "Tier 2 perpetual bond" issuances arrives in the second quarter.

After an unusually quiet first quarter, the bank "Tier 2 and perpetual bond" market heated up rapidly in the second quarter. According to Wind data, commercial banks issued a total of 20 Tier 2 capital bonds and perpetual bonds in the second quarter this year, with a combined issuance scale reaching 596 billion yuan. In the previous first quarter, the total issuance scale of Tier 2 and perpetual bonds across the market was zero, and the market experienced a temporary window period. From the perspective of issuers, this round of issuance shows a clear concentration at the top—ICBC, ABC, BOC, and CCB, the four major state-owned banks, are absolute main forces, with total issuance exceeding 350 billion yuan, accounting for nearly 60% of overall issuance. Tier 2 and perpetual bonds are important tools for commercial banks to supplement capital. Tier 2 capital bonds can replenish Tier 2 capital, while perpetual bonds can supplement other Tier 1 capital. Compared with equity financing methods such as private placement or rights issue, Tier 2 and perpetual bonds do not directly dilute shareholder equity, so they have long been an important channel for external capital supplementation in banks. Thus, the nearly 600 billion yuan of financing in a single quarter in Q2 has become an important move for banks to supplement capital this year. Behind this change reflects the continued demand among commercial banks to supplement capital. In recent years, amid efforts to serve the real economy and support financing in key areas, banks’ credit asset scale has continuously expanded, raising capital consumption pressure; meanwhile, net interest margin in the banking industry has remained at a low level, and slowing profit growth has to a certain extent weakened banks’ ability to supplement capital endogenously through retained earnings. According to the National Financial Regulatory Administration, as of the end of Q1 2026, the average capital adequacy ratio of commercial banks was 15.28%, down 0.18 percentage points from the previous quarter; Tier 1 capital adequacy ratio was 12.18%, down 0.14 percentage points; core Tier 1 capital adequacy ratio was 10.70%, down 0.05 percentage points. Although the overall level is still above regulatory requirements, industry capital adequacy ratios have seen consecutive marginal declines. Against this backdrop, supplementing capital by issuing Tier 2 and perpetual bonds has become an important choice for banks to maintain sufficient capital levels. For the four major state-owned banks, this demand is even more pronounced. On one hand, as key providers of credit, their asset scale and risk-weighted assets continue to grow, leading to sustained consumption of capital; on the other hand, as Global Systemically Important Banks (G-SIBs), they must also meet higher-level regulatory requirements such as Total Loss Absorbing Capacity (TLAC). Compared with equity financing, Tier 2 and perpetual bonds have a shorter issuance cycle, more controllable financing costs, and do not affect existing shareholder ownership proportions, making them an important tool for large banks to supplement capital. By issuing perpetual and Tier 2 capital bonds, banks can quickly raise their capital adequacy ratio, freeing up room for subsequent credit issuance and business expansion. It is noteworthy that the timing of this round of issuance also aligns with the intensive implementation stage of capital supplementation by state-owned banks. Since the beginning of this year, the Ministry of Finance has been advancing plans to increase capital for large state-owned commercial banks, focusing on supplementing core Tier 1 capital. The other Tier 1 and Tier 2 capital targeted by Tier 2 and perpetual bonds have become important sources to enhance banks' capital structure. From a market demand perspective, Tier 2 and perpetual bonds remain highly attractive. In the current low interest rate environment, supply of high-grade credit bonds is relatively limited, and the market generally faces a shortage of quality assets. Tier 2 and perpetual bonds backed by large bank credit offer both high safety and certain yield advantages, making them a favored allocation for asset management subsidiaries, public funds, and insurance institutions. Especially those issued by the major state-owned banks, with low credit risk and good liquidity, have long been important bond market allocations. Looking ahead, under the influence of multiple factors such as credit expansion, capital regulation, and profit growth pressure, banks' need to supplement capital is expected to continue. As the Big Four banks complete large-scale financing ahead of others, some joint-stock banks and city/rural commercial banks with relatively stronger capital constraints may follow suit. Risk Warning and Disclaimer The market involves risks; investment must be cautious. This article does not constitute individual investment advice, nor does it take into account the specific investment objectives, financial circumstances, or needs of individual users. Users should consider whether any opinions, viewpoints, or conclusions in this article fit their specific situation. Investing accordingly is at your own risk.