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Deutsche Bank estimates the impact of rising interest rates: US major banks face capital pressure, and stock buybacks may collectively hit the brakes.

Deutsche Bank estimates the impact of rising interest rates: US major banks face capital pressure, and stock buybacks may collectively hit the brakes.

智通财经智通财经2026/10/09 03:42
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Deutsche Bank recently released an industry research report focusing on the capital pressure faced by large US banks amid a significant rise in interest rates expected in Q3 2026.

According to Smart Finance APP, Deutsche Bank recently released an industry research report focusing on the capital pressures facing large U.S. banks against the backdrop of a significant interest rate increase expected in the third quarter of 2026. The report uses two sets of calculation models to assess the impact of interest rate fluctuations on Core Tier 1 Capital (CET1) through Accumulated Other Comprehensive Income (AOCI), and analyzes the evolution of bank stock buyback policies.

In a previous third-quarter performance outlook report, Deutsche Bank estimated that rising interest rates would put an average pressure of 51 basis points on the book capital of banks covering AOCI adjustments. To refine the calculation logic, the report introduces a second estimation method: instead of measuring only the gains and losses of Available-for-Sale securities (AFS), it applies the actual change in AOCI during the first half of 2026, a period of rising rates, and multiplies this by a factor of three (reflecting that the third-quarter rate increase is about three times that of the first half) to extrapolate capital losses for the third quarter. Both methods yield roughly similar average capital impact results across the industry, but there are significant differences in the results for individual banks.

Under the new model, capital pressure for investment banks (Goldman Sachs, Morgan Stanley), JPMorgan, Bank of America, and Wells Fargo is lower compared to the old model, with the largest adjustments seen for Morgan Stanley and Wells Fargo. For large regional banks, the overall average impact differs by only 2 basis points, but there is clear internal divergence: capital pressure eased noticeably for CFG, FITB, and USB, while capital losses were actually higher for MTB, RF, and TFC.

Banks may slow down or pause stock buybacks until rates stabilize

Although the capital calculations show that each bank’s absolute capital levels still meet regulatory requirements, the rapid rise in interest rates, highly uncertain rate outlook, and strong loan growth lead Deutsche Bank to judge that most banks will slow down or even pause stock buybacks. To restart buybacks and recover to mid-single-digit levels, banks will need to wait for rates to stabilize. Over the long term, if regulatory capital rules are implemented and the Federal Reserve’s annual stress tests are moderately relaxed with improved transparency, the scale of buybacks could rise further.

The banking group is expected to diverge: monetary center banks such as JPMorgan, Bank of America, and Wells Fargo will slow their pace of buybacks but not completely stop. This judgment is based on their solid capital base and strong profit generation as of the end of June, alongside an ongoing need to expand corporate and consumer lending and serve institutional client trading and financing needs.

In contrast, among large regional banks, 7 out of the 9 sampled by Deutsche Bank are likely to pause buybacks, as their simulated capital (after accounting for AOCI impact) is at or below 9.0%. Among them, MTB has sufficient capital buffer and may maintain buybacks; USB’s capital is close to the threshold and remains under greater capital constraints as it continues to expand its business and adjust bank category.

The report also discusses the much-debated issue of asset valuation: currently, only systemically important large banks include AOCI in regulatory capital, but future regulatory rules may expand its scope; unrealized losses on Held-to-Maturity securities (HTM) are not factored into regulatory or rating agency capital adjustments, but are considered by market investors; and low-cost deposit liabilities are not marked to market, but these liabilities have real value in a high-rate environment.

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路透社•2026/10/09 05:56
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