Do bank stocks profit when interest rates rise?

“Rising interest rates are a tailwind for bank stocks.” This is a common narrative when looking at stocks. The reason is also easy to understand. Banks collect money and lend it out. If interest rates rise, the interest earned from the money lent also increases. So, one is tempted to think: Rising interest rates ? Bank profits increase ? Bank stocks also rise. However, a question arises here. Then, are all bank stocks the same to buy now that interest rates are rising? Naturally, that is not the case. So, this time, I investigated using Sumitomo Mitsui Financial Group. Rising interest rates alone are not enough. SMFG has achieved record profits for three consecutive terms through fiscal year 2025. Furthermore, the company is targeting 1.7 trillion yen in net income attributable to owners of the parent for fiscal year 2026, 2 trillion yen by fiscal year 2028, and a ROTE of 13%. Regarding dividends, the policy is to increase them every term, with a forecast of 180 yen per share for fiscal year 2026. Looking at the numbers alone, it is quite strong. A world with interest rates has returned, and banks have become easier to profit from again. I understand this much. But what I wanted to know started from here. To what extent is this profit growth due to rising interest rates? And, even if the tailwind of rising interest rates weakens, can SMFG continue to grow its profits? If this remains unknown, “Rising interest rates = tailwind for bank stocks” is just news you are watching, and you do not actually know what you are expecting when you invest. Looking at SMFG, you can see something different. What SMFG is currently aiming for is not just simply increasing lending to earn interest income. Domestically, it is strengthening its deposit base, corporate business, and wealth management. Overseas, it is shifting from a lending-centric model to a business with higher capital efficiency. And it is raising its ROTE. In other words, if you are looking at the future, “Did interest rates rise?” is not enough. Then what should you look at? When you open a bank’s financial results document here, Net interest income. Loans. Deposits. Credit-related expenses. ROTE. CET1 ratio. Various numbers appear. The problem is, you don’t know which ones are important. Do you need to memorize them all? Which ones growing means things are going well? Where should things deteriorate for you to rethink? Until I organized this myself, bank financial results were quite difficult to read. This time, I will even decide “how to view SMFG’s next financial results.” In the following, I will not just explain banking terms in order. Regarding SMFG, 1. Why are profits growing now? 2. Will that profit growth continue in the future? 3. What are the sources of growth other than rising interest rates? 4. Conversely, what would happen to make you doubt the current premise? 5. What supports dividends and share buybacks? 6. Which numbers should you check in the next financial results? I will look at these in one flow. Finally, so that you can use it when you actually open the financial results, I will summarize it as an “SMFG Financial Results Checklist.” SMFG’s next interim financial results are scheduled for mid-November. At that time, instead of just looking at news like “Record profits,” “Increased dividends,” “Bank of Japan raised interest rates,” you will be able to open the financial results yourself and confirm whether the growth you were expecting continues. Being able to do that is the goal of this article. It is not to guess whether bank stocks will rise. What are you expecting? What will you check in the next financial results? What will make you rethink if it happens? Have these three things in advance. If you do that, you can at least advance one step beyond “bank stocks because interest rates are rising.”