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Clear out junk files and repair common Windows errorsFree Scan →Scan for outdated or missing drivers - takes under a minuteDriver Scan →Rising interest rates can lift earnings at banks and brokerages, but neither group automatically benefits. The key is whether interest earned on loans, securities, customer cash or margin balances rises faster than the cost of deposits and other funding—and how much the business also depends on fees, trading and credit conditions. A stronger interest-income outlook is not, by itself, a forecast of a stock’s return.
Why higher rates can help—or hurt—both types of company
Interest income is a spread-and-volume result. A company earns interest on assets or customer balances and pays interest on funding. Its net interest income depends on the yields it receives, the rates it pays, the size and mix of balances, and how quickly each side resets.
When market rates rise, asset yields and funding costs do not necessarily change at the same time or by the same amount. Floating-rate loans may reset sooner than fixed-rate securities; banks may face deposit competition; brokerages may adjust the interest they pay clients on cash. Customer behavior also matters: balances can grow, shrink or move to higher-yielding alternatives.
That makes the distinction between a bank and a brokerage useful, but not enough to predict results. Banks are more directly exposed to the pricing and value of loans, securities and deposits. Brokerages can earn interest on customer cash, margin loans and securities lending, alongside commissions, asset-management fees and other revenue.
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How rising rates affect banks
Loans and securities can reprice at different speeds
Banks earn interest on loans and securities and pay interest on deposits and borrowings. A bank may benefit when floating-rate loans reset upward or maturing securities are reinvested at higher yields before its funding costs catch up. The benefit can be smaller or reverse if assets are fixed-rate, loan repricing is slow, or deposit rates rise quickly.
Deposit mix and customer choices shape the funding side. Customers may move money into accounts that pay more, and competition can push a bank to raise deposit rates. Wholesale borrowing costs can also rise. The result depends on the bank’s repricing schedule, asset duration, hedges, funding mix and balance growth—not simply the direction of policy rates.
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Higher yields can reduce the value of existing fixed-rate securities
When market yields rise, the fair value of existing fixed-rate bonds generally falls. That valuation effect is separate from the interest income a bank receives over time, but it can matter for capital and liquidity, depending on the securities and the bank’s circumstances. The Federal Reserve’s May 2026 Financial Stability Report said the combined fair value of banks’ available-for-sale and held-to-maturity securities was $300 billion below book value at year-end 2025. The report noted that banks had shortened asset duration, while describing the losses as still sizable.
Company results show why timing matters
PNC reported that 2025 net interest income increased 7% and net interest margin rose 17 basis points compared with 2024. It attributed the changes to lower funding costs, continued benefits from repricing fixed-rate assets and loan growth. That is one bank’s reported result, not a rule for the sector; it illustrates how funding costs and asset repricing can matter as much as the level of rates. PNC’s 2025 Annual Report
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How rising rates affect brokerages
Customer balances and lending create interest exposure
Brokerages may earn interest from customer credit balances, margin loans, segregated cash and securities, and securities lending. Higher market rates can increase yields on some of these balances, but net revenue also depends on how much customer cash and margin borrowing the firm has, its own funding costs, securities-lending activity and how much interest it passes through to customers.
Interactive Brokers reported $3.563 billion in net interest income for 2025, up $415 million, or 13%, from the prior year. The company attributed the increase to higher average customer margin loans and credit balances and stronger securities-lending activity, partly offset by lower benchmark rates. Its filing also described yields on customer balance components declining as rates fell worldwide. This is a company-specific example, not a forecast for every brokerage. Interactive Brokers’ 2025 Form 10-K
Fees and trading can outweigh the interest story
A brokerage is not just an interest spread. Commissions, asset-management fees and other services contribute to revenue, and those lines respond to market activity, assets under management and client behavior. PNC’s annual report, for example, lists brokerage fees and asset-management fees separately from interest income. Fee revenue can diversify a firm’s sources of income, but it has its own risks and does not guarantee stable earnings.
What recent reported figures do—and do not—show
| Company or source | Reported figure | What it illustrates |
|---|---|---|
| Interactive Brokers, fiscal 2025 | $3.563 billion net interest income; up $415 million, or 13%, year over year | Customer balances, margin loans and securities lending helped drive results, partly offset by lower benchmark rates. Company filing |
| PNC, 2025 compared with 2024 | Net interest income up 7%; net interest margin up 17 basis points | PNC cited lower funding costs, fixed-rate asset repricing and loan growth. Company annual report |
| Federal Reserve, bank securities at year-end 2025 | Fair values of available-for-sale and held-to-maturity securities were $300 billion below book value in aggregate | A regulator-reported valuation issue, not a measure of any single bank’s earnings or expected stock return. Financial Stability Report, May 2026 |
| Bank of America, second quarter 2026 | $16.0 billion quarterly net interest income | The company reported year-over-year growth driven by Global Markets activity, deposit and loan growth, and fixed-rate asset repricing, partly offset by lower rates. Q2 2026 Form 10-Q |
These figures cover different companies, periods and business mixes. They are examples of reported operating results, not a like-for-like ranking of banks against brokerages or evidence that either group’s shares must rise when rates rise.
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How to compare individual stocks
Look beyond the sector label. A practical comparison starts with what management discloses about rate sensitivity and then checks the balance-sheet and revenue details that could change the outcome.
- Rate-sensitivity scenarios: Review disclosed net interest income or margin sensitivity. Note whether the scenarios assume parallel rate shifts or changes in the shape of the yield curve; those are not interchangeable.
- Repricing schedule: Compare when loans, securities, customer cash, deposits and borrowings reset, and how much of each balance is fixed- or floating-rate.
- Funding behavior: For a bank, examine deposit composition, pricing and wholesale funding. For a brokerage, examine customer cash flows, funding costs and how much of a rate change is passed through to clients.
- Balance levels and mix: Track bank loans and deposits, or brokerage customer credit balances, margin loans and segregated balances. A higher rate on a shrinking balance may not mean more total income.
- Other revenue and risks: Assess brokerage, asset-management, trading, capital-markets and service fees alongside their exposure to market activity. Separately consider credit quality, securities marks, capital and liquidity.
- Valuation: Compare the share price with the firm’s earnings outlook and risks. A rate-driven earnings improvement may already be reflected in market expectations.
Why rate sensitivity does not predict stock performance
Operating results and share prices answer different questions. A company can report higher net interest income while its stock falls if investors expected more, if credit losses rise, or if another business line weakens. Conversely, a firm can benefit from falling rates if funding costs drop or market activity improves. Filings and regulator reports describe exposures and reported results; they do not establish a guaranteed sector-level share-price response.
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