On June 9, Nanjing Bank (601009.SH) announced that its stock price had closed at or above 130% of the conversion price (10.69 yuan/share) for 15 consecutive trading days between May 13 and June 9, 2025. According to the bond terms, the bank decided to exercise its early redemption right for the “Nanyin Convertible Bond”.
Bank convertible bonds see accelerated conversions in 2025
This year has witnessed four bank convertible bonds either triggering or completing mandatory redemptions, including those issued by Chengdu Bank, Suzhou Bank, and Hangzhou Bank. Only eight bank convertible bonds remain in the market after these redemptions.
Analysts attribute this trend to the strong performance of bank stocks. “The valuation recovery of bank stocks driven by incoming capital has been the main reason for the wave of redemptions,” said Zhai Tiantian, an analyst at Oriental Jincheng Research and Development Department.
Mechanism behind bank convertible bond redemptions
For banks, convertible bonds serve as an important method to supplement core tier-1 capital. “After investors convert bonds to shares, the funds transform into equity capital, effectively strengthening the bank’s core tier-1 capital ratio,” explained Wang Pengbo, Chief Financial Industry Analyst at Broadcom Consulting.
As of June 10, Wind data shows the banking sector continued to attract capital inflows, with the Banking Select Sector Index rising 0.55% and net inflows reaching 1.427 billion yuan for the day.
Nanjing Bank’s capital strength enhancement
The “Nanyin Convertible Bond” was issued in 2021 with a total scale of 20 billion yuan and a six-year term. Due to dividend distributions, its conversion price has been adjusted multiple times from the initial 10.10 yuan/share to the current 8.22 yuan/share.
Huatai Securities research indicates that after complete conversion, Nanjing Bank’s core tier-1 capital adequacy ratio would increase to 9.46%. However, analysts note that forced conversions may create short-term pressure on the bank’s stock price due to increased share supply.
Market outlook for remaining bank convertible bonds
Among the eight remaining bank convertible bonds, those issued by Industrial Bank and SPD Bank have the largest outstanding amounts at 50 billion yuan each. Analysts predict varying conversion probabilities for different bonds:
“Qilu Convertible Bond, Changyin Convertible Bond, Shangyin Convertible Bond and Chongyin Convertible Bond have relatively high probabilities of successful conversion,” Zhai Tiantian projected. She added that introducing strategic investors could help resolve conversion pressures for bonds with higher conversion premiums.
The banking sector’s strong performance in 2025, with average stock price increases of 31.29% for some banks, has significantly reduced the difficulty for many convertible bonds to meet redemption conditions.
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