Why are bank stocks bought even though rising interest rates are a problem?

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Mortgage interest rates are rising. The burden on companies borrowing money is also increasing. Yet, bank stocks are being bought.

Even though it is the same news about “rising interest rates,” the perspective changes depending on one’s position.

I have previously considered the reasons why crude oil prices and U.S. Treasury yields are not falling. This time, I want to focus on the side that receives those interest payments.

In the Japanese market on September 25, 2026, bank stocks such as Mitsubishi UFJ and Sumitomo Mitsui rose. However, the price increase on this day cannot be explained by interest rates alone. There were other buying factors, such as securing dividend rights.Market conditions of the day/Kabutan

So, why exactly do rising interest rates act as a tailwind for banks in the first place?

Banks also have “interest to pay”

Banks lend money and receive interest. On the other hand, they also pay interest to those who deposit money.

This difference is an important part of a bank’s earnings. Of course, there are other sources of income such as fees, so this difference does not translate directly into final profit.

To understand the mechanism, let’s compare the annual interest on the same 1 million yen.

*This is not actual bank interest or financial results. It is a calculation example where loan and deposit balances are fixed at the same amount, excluding expenses, taxes, and losses from non-repayment.

In this example, the interest received increased by 5,000 yen, and the interest paid increased by 2,000 yen. The net gain increased by 3,000 yen.

It is this kind of change that people buying bank stocks are expecting.

However, loan interest rates and deposit interest rates do not necessarily move conveniently at the same time. Since there are also fixed-rate loans, income does not increase for all loans from the day after interest rates rise.Bank of Japan document analyzing the impact of interest rate changes (April 2024)

“If interest rates rise, it’s all profit” is not true

This is where you want to think before buying stocks.

If banks compete for deposits, they need to increase the interest paid to depositors even more. Even in the previous example, if payments increase to 6,000 yen, the difference is 9,000 yen. It is no different from before the interest rates rose.

There are also the circumstances of the borrowers. If the repayment burden becomes too heavy, some companies will be unable to repay their loans. Even if you earn a little bit from interest, if you cannot recover the principal lent, those earnings will be eroded.

Another point is that banks also hold government bonds and the like. Generally, when market interest rates rise, bonds with lower interest rates purchased previously decrease in value. The impact differs depending on whether they can be held until maturity or if they need to be sold midway. The amount of the price decline does not all immediately become a final loss.

In short, what we want to confirm is not just whether interest income will increase.

Will payments and losses not exceed the increased interest income?

It is necessary to look at both the benefits and the burdens of rising interest rates.

What kind of interest rate hike is welcome for banks?

In my view, what is desirable for banks is a situation where interest rates rise gradually while corporate sales and household income also grow, and the demand for borrowing and the ability to repay are maintained.

Conversely, if the cost of living and corporate expenses increase due to high crude oil prices, and interest rates rise while the economy remains weak, the story changes. The burden on borrowers becomes heavier, which could potentially rebound on the banks.

This is a speculation about the future. Roughly speaking, I would like to look at the following three points separately.

It is not determined that bank stocks will always rise or fall in any situation. In its April 2026 review, the Bank of Japan also evaluated that Japanese financial institutions have a foundation to withstand stress, while pointing out issues such as future borrowing demand. I want to think about “there is a risk” and “it will immediately become a crisis” separately.BOJ Financial System Report

Banks making a profit is different from buying now and making a profit

Finally, there is one more pitfall.

Even if business performance is likely to improve, if the stock price has already risen significantly by factoring in that expectation, good financial results alone may not be enough.

“They made a profit as expected. But I thought it would grow more.” If it is perceived that way, the stock price may fall even with good financial results.

If you are researching bank stocks, I would like to check the following four points in the next financial results.

• Is the profit, calculated by subtracting interest paid from interest received, increasing?

• Are the costs for preparing for uncollectible loans not increasing?

• What about the decline in the value of bonds held and the capacity to withstand it?

• Is the current stock price not expecting too much profit growth in the future?

Major banks and regional banks are not under the same conditions. The impact of interest rates varies depending on the ratio of overseas business, the ability to collect deposits, the borrowers, and the bonds held.

Interest rates have risen. Therefore, I will buy bank stocks.

In the meantime, I would like to confirm one thing.

At that interest rate, will the bank’s customers be able to pay it back properly?

When looking at a bank’s profits, try to imagine the lives and businesses of those who are borrowing. Only by looking that far do I feel I can understand the substance of the phrase ‘rising interest rates are a tailwind’.

*This is an explanation of the mechanism based on information as of September 26, 2026. It does not recommend the purchase of individual stocks.

One more book as an entry point to reading financial statements

“New Edition: Understanding the Three Financial Statements Together” by Katsunori Kunisada

‘Profits have increased’ and ‘the company has money’ are different stories. If you want to organize the basics of reading financial statements, this book is a candidate. It is an introductory book for learning the connections between the three financial statements, not a book specialized in bank financial statements. This is a learning candidate selected after checking the product description and table of contents, not a completed reading review.

Check the cover, table of contents, and price on Rakuten

Before adding a book, another method is to open the financial results briefing materials that each bank publishes for free.

5 books to return to when you are lost in investment, and tools you want to keep at hand are also summarized by purpose.