9 Banks Upgraded, 4 Downgraded: Latest Credit Ratings of Small and Medium-Sized Banks

Shanghai Securities Journal reporter An Yi

The latest credit ratings of small and medium-sized banks have been released.

Our reporter noticed that in the past two months, a total of 9 small and medium-sized banks have had their credit ratings upgraded, including 7 city commercial banks and 2 rural commercial banks with larger asset scales. These banks generally benefited from regional economic development and achieved recognition through reforms such as risk management, capital strengthening, and increasing shareholders' equity.

At the same time, a total of 4 small rural commercial banks have had their credit ratings downgraded, with many more banks having delayed releases of their credit reports, all due to reasons that are not yet publicly disclosed. According to regulations, commercial banks should at least publish quarterly credit tracking reports once a year and no later than three months before the release of their annual report.

Government support drives rating upgrades

In the process of evaluating small and medium-sized banks, capital strength and government support are often taken into account by credit rating agencies. Many local governments and state-owned enterprises have further increased their stake in these banks through capital injections or share purchases, which has helped optimize their equity structure and strengthen corporate governance and risk management.

For example, Hankou Bank and Qinhuangdao Bank both completed capital increases last year. Dayao Bank pushed its capital up by 4.5 billion yuan through profit-sharing and increasing shareholders' equity. Wuhan Rural Commercial Bank received approval for a non-public offering of shares not exceeding 7.71 billion yuan.

After completing the capital increase, Hankou Bank's state-owned shares and shares held by state-owned entities accounted for 68.49% of its total shares.

According to a tracking report issued by Jincheng Credit Rating Co., Ltd., after Hankou Bank increased its capital and expanded its shareholder base, the government's willingness to support it has strengthened, enabling it to develop its core business with the help of state-owned shareholders in terms of customer channels and other areas.

In addition, Shaoxing Bank, a state-controlled local commercial bank, completed a major share transfer last year. Its state-owned shares accounted for 66.94% of its total shares, optimizing its equity structure.

East China Credit Rating Co., Ltd. issued a report stating that Shaoxing City Government will steadily increase Shaoxing Bank's state-owned shares while actively seeking provincial government special bond financing to optimize the bank's capital structure.

After Chengdu Bank was approved to acquire 40.92% of Longcheng Huxi Bank, its credit rating was also upgraded. The report stated that after the share transfer, the bank is expected to gain strong support in terms of sharing client resources, improving market image, and building brand effects.

Operational quality improvements drive rating upgrades

This round of credit rating upgrades also reflects the systematic progress made by small and medium-sized banks in recent years in terms of operational quality, risk management, and strategic transformation.

CSCCS issued a report stating that the main reason for the upgrade of Jiangsu Changjiang Commercial Bank's credit rating was its excellent operating environment, with loan volumes maintaining steady growth, and non-performing assets decreasing significantly.

At the end of July, Yuhang Rural Commercial Bank's credit rating was upgraded to AAA. The report stated that the bank has a strong client foundation, good deposit growth, and low bad debt rates, with its credit quality ranked among the best in the industry.

Fujian Bank also had its credit rating upgraded by CSCCS at the end of July. The report stated that the bank has been continuously strengthening its ties with government agencies and improving its operating environment, with its loan volume and deposit growth increasing steadily.

4 banks downgraded

In addition to the 9 banks that were upgraded, a total of 4 rural commercial banks had their credit ratings downgraded, including Shanxi Yuci Rural Commercial Bank, Hunan Changde Rural Commercial Bank, Guizhou Huayuan Rural Commercial Bank, and Shanxi Pingyao Rural Commercial Bank. The main reasons for these downgrades included high loan risks, poor profitability, inadequate capital strength, and high concentrations of loans to certain industries or customers.

In reality, the phenomenon of small and medium-sized banks' credit ratings being downgraded is not uncommon. According to statistics, from 2018 to 2021, more than 10 city commercial banks and rural commercial banks had their main credit ratings adjusted downward each year.

However, in recent years, the banking industry has undergone a wave of mergers and restructurings, with "reduction" becoming a trend. This is a key measure for banks to resist risks and build a solid foundation for their operations, which has led to a significant change in the rating downgrade phenomenon.

According to data, in 2022, Liaoyang Liaodong Rural Commercial Bank and Henan Baofeng Rural Commercial Bank had their credit ratings downgraded. In 2023, Yanbian Rural Commercial Bank, Shanxi Yuci Rural Commercial Bank, and Changshun County Agricultural Cooperative Bank had their credit ratings downgraded. And in 2024, only Shandong Anji Rural Commercial Bank had its credit rating downgraded.