Xiamen Bank Co.,Ltd. (601187.SH) delivered a positive performance in the third quarter of 2025, with operating income rising 3.02% year-on-year and net profit increasing 0.73%, marking a turnaround from previous declines and injecting confidence into the capital markets. On October 30, the day of its earnings release, the bank's stock price surged as much as 5% intraday, closing 3.09% higher at RMB 7.01 per share.
Investment gains remained a key driver of Xiamen Bank's performance. However, despite this growth, the bank reported a RMB 640 million loss in "other comprehensive income" for Q3, a sharp decline of RMB 1.283 billion from the beginning of the year.
A bank representative explained that the loss was due to fluctuations in the fair value of bond investments. Analysts noted that while "other comprehensive income" represents unrealized losses and does not immediately impact current earnings, these losses could materialize and affect profits if the underlying assets are sold.
**Bond Investments Drive Significant Losses in "Other Comprehensive Income"** Financial reports showed that in the first three quarters of 2025, Xiamen Bank achieved operating income of RMB 4.29 billion, up 3.02% year-on-year, and net profit of RMB 2.026 billion, up 0.73%. Both metrics turned positive after previous declines.
Breaking down revenue, net interest income, net fee and commission income, and investment gains all posted growth, reaching RMB 3.091 billion, RMB 332 million, and RMB 973 million, respectively, with investment gains surging 29.55% year-on-year. Investment gains have become an increasingly significant contributor to revenue, accounting for nearly 20% of total revenue in recent years.
In 2024, Xiamen Bank's net interest income fell by RMB 322 million, down 7.43% year-on-year. However, amid declining bond yields, the bank optimized its investment portfolio by allocating to higher-yielding local government bonds and credit bonds, boosting investment gains by RMB 562 million, a 121.14% increase. This helped drive a 2.79% rise in total operating income.
Encouraged by strong returns, Xiamen Bank remained optimistic about bond investments. In March, the bank stated that under proactive fiscal and moderately loose monetary policies, the bond market in 2025 would still present opportunities for allocation and trading.
However, bond yields trended upward with volatility in the first three quarters, particularly in Q3, when the 10-year and 30-year government bond yields rose to 1.9% and 2.2%, respectively. Despite higher investment gains, Xiamen Bank's "other comprehensive income" recorded a RMB 640 million loss in Q3, a sharp reversal from the RMB 643 million gain at the start of the year.
The bank attributed the loss to fair value fluctuations in bond investments, citing rising bond yields in Q3 that negatively impacted the valuation of bonds classified under "other comprehensive income."
**Potential Impact on Future Performance** "Other comprehensive income" is separate from operating income in bank financial statements, meaning the Q3 loss did not immediately affect earnings. However, the metric has shown significant volatility, with figures of RMB -480 million, RMB 85 million, and RMB -245 million in the first three quarters of 2025.
Legal and financial experts noted that while unrealized losses in "other comprehensive income" do not directly erode core Tier 1 capital or trigger regulatory capital requirements, they could weaken the bank's capital adequacy buffer. If bond markets face further adjustments in Q4, the bank might need to reduce risk assets or slow credit expansion, potentially constraining future net interest margin growth.
Regarding the divergence between rising investment gains and losses in "other comprehensive income," analysts suggested that the bank likely realized gains from bonds classified as "fair value through profit or loss," while bonds held for liquidity purposes (such as government and policy financial bonds) suffered valuation declines due to rising rates, leading to the "other comprehensive income" loss.
When asked about mitigating the potential impact of bond fair value fluctuations on future performance, Xiamen Bank did not provide a detailed response but stated it would enhance market analysis to capitalize on trading opportunities and improve bond investment returns.
Founded in 1996, Xiamen Bank is the first city commercial bank in mainland China with Taiwanese capital and the first listed city commercial bank in Fujian Province. As of September 2025, its total assets stood at RMB 442.558 billion, up 8.52% from the previous year, with loans and advances totaling RMB 234.524 billion, a 14.15% increase. Total liabilities grew 9.06% to RMB 409.452 billion, including customer deposits of RMB 238.098 billion, up 11.18%.
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