Shares in PSBC, which at 39,700 has the largest branch network in China, closed 2% higher at 5.61 yuan after having opened at 5.60 yuan in the largest mainland share sale in four years. The benchmark Shanghai index closed up 0.1%.

The PSBC debut adds to the recent downbeat investor reaction to share offerings by the local banks.

Zheshang Bank Co Ltd, for example, rose less than 1% on its debut in Shanghai on Nov. 27 and dropped below its IPO price the following day. The stock dropped 1.5% on Tuesday.

Worries about the health of China's banking sector and banks' capital levels in particular have intensified this year after regulators seized control of Inner Mongolia-based Baoshang Bank in May, citing serious credit risks.

Since then, regulators have introduced measures to ease liquidity strains for banks as Beijing looks to lenders to support its efforts to boost industrial activity to shore up growth.

"No matter for what reason, risk prevention or supporting the real economy, capital replenishment is a must," Wang Yifeng, chief banking analyst at Everbright Securities Co, said. He added that banks are running out of options to raise capital.

PSBC said last week that investors had opted out of paying for 3% of shares on offer in its Shanghai listing, leaving the bank's underwriters to pick up the unsold shares.

The lender, which first listed in Hong Kong in 2016, is conducting the Shanghai float at the behest of the central bank which wants state-owned lenders to be more responsive to the rigours of capital markets.

PSBC raised at least 28.45 billion yuan (3.15 billion pounds) from the first part of its share sale. Total funds raised could rise to $4.7 billion if it chooses to exercise a greenshoe option of selling 15% more shares within 30 days from the start of trade.

Set up in 2007, PSBC built its business on a large customer base in China's rural areas thanks to its parent state-owned China Post Group Corp, which operates postal services.

By end-June, 48% of its branches were located in rural counties and villages. It had some 9.17 trillion yuan savings on its books by the end of September, accounting for 96% of the bank's total liabilities.

(Reporting by Cheng Leng in Beijing,Sumeet Chatterjee in Hong Kong, and Samuel Shen and Luoyan Liu in Shanghai; Editing by Himani Sarkar and Jane Merriman)

By Cheng Leng and Sumeet Chatterjee