Guosheng Securities: The banking precious metals business is expected to become an important growth driver, and the dividend strategy may still have sustainability

According to the Zhitong Finance APP, Guosheng Securities released a research report stating that although the gold market will face challenges due to high volatility in 2025, it has not changed the trend of listed banks deepening their precious metals business. Supported by the continued increase in gold holdings by global central banks, the contribution of precious metals business, represented by gold, to the profitability stability of listed banks may become increasingly prominent. Tariff policies may bring short-term impacts on exports, but in the medium to long term, domestic expansionary policies such as stabilizing real estate, promoting consumption, and increasing social security are expected to accelerate implementation, supporting economic stability and growth. The banking sector will benefit from policy catalysis, and cyclical stocks may have alpha; at the same time, as economic recovery requires some time and interest rate cuts are still expected, the dividend strategy may still have sustainability.

The main points of Guosheng Securities are as follows:

Policy and Market Environment: Laying the Foundation for the Development of Bank Gold Business

As of the end of September 2025, China's official gold reserves stood at 74.06 million ounces, having increased for 11 consecutive months, with an increase of 40,000 ounces compared to the end of August. Globally, in the second quarter of 2025, central banks increased their reserves by a total of 166 tons. Although the pace of gold purchases has slowed, a survey by the World Gold Council shows that 95% of the central banks surveyed expect global central bank gold reserves to further increase in the next 12 months.

In February 2025, the Financial Regulatory Administration issued a notice on the pilot program for insurance funds to invest in gold business, launching a pilot program for insurance funds to invest in gold. It identified ten pilot insurance companies, including China People's Property Insurance Company, which can invest in various gold investment products such as spot contracts and deferred delivery contracts on the Shanghai Gold Exchange. The policy has created new corporate service opportunities for listed banks, which may leverage their professional advantages to provide trading execution, margin custody, asset custody, and other services to insurance institutions, increasing intermediary business income and promoting the transformation of banks from pure channel services to comprehensive financial solutions.

In June 2025, the Shanghai Gold Exchange announced the list of interbank gold inquiry market makers for the 2025-2026 period. Currently, there are 13 official market makers in the interbank gold inquiry market and 4 trial market makers, all of which are listed banks. The improvement of the market maker system helps enhance the liquidity and stability of the gold market. As market makers, listed banks promote market transactions by providing both buy and sell quotes, enhancing their influence and voice in the gold market.

Business Dynamics and Revenue Contribution: Precious Metals Business May Become an Important Growth Engine for Bank Intermediary Income

According to statistics from the China Gold Association, in the first half of 2025, China's gold consumption was 505.205 tons, a year-on-year decrease of 3.54%. Among them, gold jewelry consumption was 199.826 tons, a year-on-year decrease of 26%; gold bars and coins consumption was 264.242 tons, a year-on-year increase of 23.69%; industrial and other gold consumption was 41.137 tons, a year-on-year increase of 2.59%. Market demand shows a clear structural differentiation: investment demand for gold bars and coins is strong, while gold jewelry consumption has declined due to high gold prices. This trend lays the foundation for banks to deepen their precious metals investment business and optimize their business structure On one hand, the demand for gold bars and coins has increased by more than 20% year-on-year, directly reflecting the residents' heightened demand for gold as a safe haven and a store of value. As banks serve as the core channel for the sale of gold bars and the consignment of coins, coupled with the continuous popularity of online investment products such as account gold and gold accumulation, they can accurately meet this strong demand. On the other hand, the decline in gold jewelry consumption may prompt banks to reduce their reliance on traditional gold jewelry consignment business and instead focus on the innovation and promotion of investment-grade precious metal businesses. This adjustment not only aligns with the current changes in market demand but also enhances the support of the precious metals sector for bank profitability through stable investment-related business income.

Risks and Outlook: High Volatility Becomes the Norm, Risk Control Capability Determines Success or Failure

Despite the strong fundamentals of the gold market, high volatility has become a core challenge that listed banks must face. In October 2025, after reaching a historical high, international gold prices quickly corrected, with significant daily fluctuations, directly testing banks' capabilities in two areas: first, the risk control capability of proprietary gold trading, and second, the service capability to preserve client assets.

Looking ahead, the contribution of precious metal businesses to bank profitability will no longer solely rely on the "universal dividend" brought by the overall rise of the gold market, but will depend more on the banks' own hard capabilities, including whether they can establish a comprehensive risk control system to hedge against price volatility risks and whether they can achieve stable returns through optimized asset allocation. In this context, banks with robust risk control and the ability to provide liquidity due to their market-making position are expected to consolidate their advantages and expand market share amid fierce industry competition.

Equity Market Tracking

1. Trading Volume: This week, the average daily trading volume of stocks was CNY 1.79743 trillion, a decrease of CNY 395.59 billion compared to last week. 2) Margin Financing: The balance is CNY 2.44 trillion, a decrease of 0.25% compared to last week. 3) Fund Issuance: This week, the issuance of non-monetary fund shares was CNY 16.096 billion, an increase of CNY 6.548 billion compared to last week. Since October, a total of CNY 26.774 billion has been issued, a year-on-year decrease of CNY 6.557 billion. Among them, equity funds accounted for CNY 8.817 billion, a year-on-year decrease of CNY 6.350 billion; mixed funds accounted for CNY 6.014 billion, a year-on-year increase of CNY 3.651 billion.

Interest Rate Market Tracking

1. Interbank Certificates of Deposit: A. Volume: According to Wind data, the issuance scale of interbank certificates of deposit this week was CNY 962.34 billion, an increase of CNY 234.77 billion compared to last week; the current balance of interbank certificates of deposit is CNY 20.60 trillion, an increase of CNY 634.38 billion compared to the end of September. B. Price: The issuance interest rate of interbank certificates of deposit this week was 1.65%, an increase of 2 basis points compared to last week; the issuance interest rate in October was 1.64%, unchanged from September. 2) Bill Rates: This week, the average discount rate for six-month state-owned banks and joint-stock banks was 0.63%, a decrease of 7 basis points compared to last week; the average rate in October was 0.68%, a decrease of 13 basis points compared to September. This week, the average discount rate for six-month city commercial bank bills was 0.79%, a decrease of 7 basis points compared to last week; the average rate in October was 0.84%, a decrease of 13 basis points compared to September. 3) 10-Year Treasury Yield: This week, the average yield on 10-year treasury bonds was 1.84%, unchanged from last week. 4) Local Government Special Bond Issuance Scale: This week, new special bonds issued amounted to CNY 112.361 billion, an increase of CNY 92.27 billion compared to last week, with a cumulative issuance of CNY 38,096.76 billion since the beginning of the year
2. Progress of special refinancing bond issuance: This week, new special refinancing bonds worth 21.4 billion yuan were issued, with an average interest rate of 2.20%. The total issuance for the year has reached 2,017.313 billion yuan