Al Bentley
5 min read
Hot jobs data, stubborn inflation and a jump in Treasury yields have suddenly put interest rates back in the driver’s seat for US markets. Higher borrowing costs are pressuring many growth stories, yet they can open the door for certain banks and insurers that earn more on loans and investment portfolios. In this article you will see three stocks exposed to this rate shock and why their stories now demand a closer look.
The three stocks below are just a starting sample, and the full screen surfaced 17 more US banks and insurers with equally compelling interest rate stories that are not covered here.
If you want to identify and analyze the highest conviction ideas in this theme, head straight into the US Financials – Banks And Insurers Benefiting From Higher Interest Rates screener.
Prosperity Bancshares (PB)
Overview: Prosperity Bancshares is a Houston based bank holding company that earns most of its money on traditional lending and deposits, making net interest margins central to its higher rate story.
Operations: Prosperity Bancshares generates about US$1.6b of banking revenue entirely in the United States, tying its income directly to domestic interest rate conditions.
Market Cap: US$8.8b
Prosperity Bancshares sits near the center of this higher rate theme because its profitability leans heavily on the spread between what it earns on loans and securities and what it pays on deposits. This is exactly where the analyst consensus Narrative on Simply Wall St picks up the story.
“Completion of the American Bank, Texas Partners and Stellar transactions positions Prosperity Bancshares to consolidate a larger Texas and Oklahoma footprint, with management pointing to about US$100 to US$110 million of annual pretax cost savings that would directly support a lower efficiency ratio and higher net earnings power once integration is complete.”
What matters next is how one unresolved pressure on funding costs shapes the step up in margins that investors are counting on.
To see how that funding squeeze could reshape Prosperity Bancshares’ earnings power, read the full narrative for Prosperity Bancshares and see what the market might be missing.
Pinnacle Financial Partners (PNFP)
Overview: Pinnacle Financial Partners is a US bank holding company that focuses on relationship banking, earning heavily from interest on loans and deposits.
Operations: Pinnacle Financial Partners generates about US$3.4b from banking activities and US$4.0b in total revenue, all from the United States.
Market Cap: US$15.2b
