Banks' operating profit margins also are expected to worsen, following the central bank's decision on Friday to cut interest rates for the sixth time in less than a year.
China's listed commercial lenders raised $57.6 billion last year to bolster their core capital according to Thomson Reuters data.
But they may need to raise an additional 553 billion yuan ($87.07 billion) if a slowdown in the economy pushes the ratio of non-performing loans (NPLs) from 1.5 to 4 percent, according to calculations by Barclays' banking analyst Victor Wang.
Huaxia Bank is the latest lender to get approval from the Chinese Banking Regulatory Commission (CBRC) to issue 20 billion yuan in preference shares, a bank official told Reuters News.
The economic downturn and structural adjustment have caused "overdue loans to increase quickly, increasing pressure on credit risk management of the entire system," the official said.
Preference shares pay investors a fixed dividend taken from a company's after-tax profits, and are a more expensive form of financing than bonds, which pay out interest before taxes.
Huaxia Bank will follow other Chinese mid-tier banks that recently announced fundraising plans, including Huishang Bank Corp, China Everbright Bank and China Citic Bank, which said last month that it had approval to sell up to 350 million preference shares.
China's biggest issuers of high quality tier 1 capital over the last 18 months have been its "Big Four" commercial banks, which are expected by analysts to report this week that their percentage of non-performing loans increased this quarter.
Read MoreWatch out for this kind of China stimulus
The CBRC has ordered the country's systemically important lenders to hold, by 2018, a minimum of 9.5 percent in core tier one capital, which is made up of equity and retained earnings. Currently most of them hold capital above that level, though they all have programs under way to raise more to ensure they can comfortably stay above that target.
Industrial & Commercial Bank of China, China Construction Bank Corp and Bank of China, raised $33.3 billion last year, mainly by selling preference shares and subordinated debt, Thomson Reuters data shows.
The total value of bad loans at Chinese banks surpassed 1 trillion yuan in the first half of this year for the first time since 2008, representing 1.5 percent of all issued loans, according to the China Banking Regulatory Commission.
However some Chinese banks are extending the amount of time a loan can be overdue for before they classify it as "bad", meaning the number of problem loans on their books could be higher.
Loans that are overdue by more than 90 days, but not classified as impaired, increased 166 percent during the first half of the year among China's listed banks, UBS banking analyst Jason Bedford said in a note last month.
For example China Minsheng Banking Corp's proportion of non-performing loans (NPL) increased slightly to 1.36 percent at the end of June, from 1.17 percent in 2014, but its number of overdue but not impaired loans rose by more than 70 percent to 48.4 billion, representing 2.57 percent of all its loans.
A China Minsheng Bank spokesman declined to comment on its overdue loan level.
At Huaxia Bank, the volume of loans 90 days past due but unimpaired increased 289 percent, to 34 billion yuan, during the first six months of the year while its impaired loan ratio worsened only marginally to 1.35 percent.
Still, the proportion of bad loans in China's banking system as a whole is still well below the level hit in the early 2000s, when the culmination of years of government directed lending meant the NPL ratio at some banks in excess of 20 percent.
Read MoreHow hungry is China for the world's food?
But back then China's fast growing economy enabled lenders to run down their bad debt levels relatively quickly. Now, with growth slowing, the chances of such a quick recovery look slim.
"We foresee NPLs will continue to climb as the economy slows - no growth turnaround is foreseen in the near future," said Andrew Wood, the Singapore-based head of Asia country risk at BMI Research.