What is the intention behind the exit of bank preferred stocks? Institutional analysis is here!

As of February 25, 2026, 13:17, the CSI Bank Index (399986) decreased by 0.29%. The constituent stocks showed mixed performance, with related bank ETFs Huaxia (515020) down 0.36%, with a latest price of 1.65 yuan.

Before the holiday, Ping An Bank announced it will exercise its redemption rights, fully redeeming its 200 million shares of preferred stock “Pingyin You 01” issued non-publicly in March 2016, on March 9. This is not an isolated case; since the second half of 2025, banks’ preferred stocks have been exiting the market in large numbers. By 2026, two joint-stock banks have successively redeemed their preferred stocks.

Previously issued preferred stocks had higher dividend yields, making their costs significantly higher than perpetual bonds and Tier 2 capital bonds, which are capital replenishment tools. Additionally, preferred stock dividends do not offer tax-deductible effects, whereas interest on perpetual bonds can be deducted before tax, resulting in a lower actual after-tax financing cost. Moreover, regulators encourage banks to improve capital quality. Although preferred stocks are considered other Tier 1 capital, their high dividend yields exert ongoing pressure on net profit.

Experts say that in the context of the banking industry’s narrowing net interest margin due to falling interest rates and increased regulatory requirements for capital quality, redeeming preferred stocks can free up capital, improve capital adequacy ratios and utilization efficiency; this helps banks optimize capital structure, reduce financial burdens, and enhance operational efficiency. Some institutions predict that major banks may proactively redeem domestic preferred stocks in 2026.

Everbright Securities believes that fundamentally, banks have strong operational stability. The early-year credit “good start” in 2026 is relatively moderate, and the full-year balance sheet expansion will remain robust. Coupled with the easing pressure of narrowing interest spreads compared to the previous year, this will strongly support interest income.

Huaxia Bank ETF (515020), which tracks the CSI Bank Index (399986), has the lowest comprehensive fee rate among similar ETFs, with connection funds A class 008298; C class 008299; D class 024642.

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