Rising interest rate stocks

Schwab’s established brokerage cash-sweep and interest-bearing idle-cash products provide a direct and scalable destination for displaced balances.

Brokerages benefit from higher rates on client cash held in short-term securities.

Charles Schwab stands to reap substantial interest revenue from clients' transactional cash balances as the Fed's higher-for-longer regime maintains elevated yields on short-term liquid securities.

Higher short-term rates increase the yield earned on client cash and sweep balances, supporting Schwab’s net interest revenue. The benefit is partly offset if clients move balances into higher-yielding money-market products.

The Charles Schwab Corporation (SCHW) stands as a prominent financial services enterprise, delivering a comprehensive suite of offerings that encompass wealth management, securities trading and brokerage, banking services, asset administration, custodial solutions, and financial planning advice. Its operations are primarily structured around two core divisions: Investor Services and Advisor Services. The Investor Services segment caters directly to individual retail clients, furnishing a range of services such as brokerage accounts, investment guidance, banking and trust administration, retirement planning, and corporate brokerage offerings. It further assists businesses with the full-service recordkeeping of equity compensation plans (e.g., stock options, restricted stock, performance shares), provides clearing services for retail investors and mutual funds, and offers compliance solutions. Conversely, the Advisor Services segment provides a robust support system for independent investment advisors. This includes custodial services, trading platforms, banking infrastructure, and general operational support. Within this segment, offerings span diverse brokerage accounts for equities, fixed income, margin lending, options, and futures/forex trading. It also facilitates cash management through various instruments, provides access to a broad selection of proprietary and third-party mutual funds and ETFs, and offers comprehensive trading and clearing for these investment vehicles. Furthermore, it delivers sophisticated advice solutions like managed portfolios, separately managed accounts, customized personal financial guidance, and specialized planning. Complementing these are banking products such as checking and savings accounts, first-lien residential mortgages, home equity lines of credit, and pledged asset lines, alongside a full spectrum of trust services including custody, reporting, and administrative roles. As of December 31, 2021, the company maintained an extensive physical presence, with approximately 400 domestic branch offices located across 48 U.S. states and the District of Columbia, in addition to sites in Puerto Rico, the United Kingdom, Hong Kong, and Singapore. Established in 1971, its corporate headquarters are situated in Westlake, Texas.

Interactive Brokers holds large client cash balances, generating substantial positive yield as rates rise.

Interactive Brokers provides brokerage cash-management and sweep functionality that can capture balances displaced from a restricted payment wallet. More customer cash held in brokerage deposits or sweep vehicles could support interest and fee income, but the company could face additional disclosure and operational requirements if regulators broaden scrutiny of cash-balance arrangements.

Interactive Brokers Group, Inc. operates as a sophisticated electronic brokerage, serving clients across the United States and globally. This firm manages the trading, clearing, and settlement for a broad spectrum of financial instruments, including equities, options, futures, foreign exchange, bonds, mutual funds, exchange-traded funds (ETFs), precious metals, and digital currencies. Beyond its core brokerage activities, the company provides custodial and administrative account services tailored for various entities such as hedge funds, mutual funds, ETFs, registered investment advisors, proprietary trading desks, introducing brokers, and individual investors. Its suite of services also includes custody solutions, prime brokerage, and financing options like securities lending and margin lending. Interactive Brokers caters to both institutional and individual clientele, utilizing advanced electronic exchanges and market platforms. The company was established in 1977 and maintains its headquarters in Greenwich, Connecticut.

ICE captures elevated trading and clearing fees amid policy uncertainty as market participants seek to hedge interest rate and mortgage risks.

Intercontinental Exchange captures higher transaction and clearing volumes on its derivative and interest rate platforms. Significant movements in bond yields and weak auction results trigger heightened interest rate volatility, forcing institutional clients to execute frequent risk transfers and real-time hedging of duration risk.

Uncertainty over whether Treasury will deploy nearly $1 trillion of cash rather than bill financing can increase duration, Treasury, mortgage-derivative, and clearing activity as investors reposition for changes in the 10-to-30-year curve. ICE benefits from execution and clearing volumes, although a successful intervention could reduce volatility after the initial adjustment.

The unresolved pause-versus-December-hike path increases uncertainty around short rates, Treasury yields, mortgages and foreign exchange. That supports interest-rate, mortgage-derivative and related clearing activity on ICE, although the benefit depends on continued uncertainty rather than the eventual policy outcome.

Intercontinental Exchange, Inc. (ICE) manages a global network of regulated financial venues, encompassing exchanges, clearing houses, and listing platforms. These operations serve diverse markets, including commodities, financial instruments, fixed income products, and equities, with a geographical footprint spanning key financial centers such as the United States, United Kingdom, European Union, Singapore, Israel, and Canada. The company's business is segmented into three core areas: Exchanges, Fixed Income and Data Services, and Mortgage Technology. Within its Exchanges segment, ICE oversees a robust network comprising 13 regulated exchanges and 6 clearing houses. These extensive marketplaces enable the listing, trading, and clearing of a wide spectrum of derivatives contracts and financial securities. This includes futures and options across diverse sectors such as energy, agriculture, metals, financials, and equities, in addition to providing critical listing, market data, and connectivity solutions. The Fixed Income and Data Services division provides comprehensive analytics and execution services for fixed income products, manages Credit Default Swap (CDS) clearing, and offers multi-asset class data and network solutions. Furthermore, its Mortgage Technology segment delivers an advanced, proprietary platform designed for residential mortgage origination. This division also provides closing solutions that streamline connections across the mortgage supply chain and facilitate secure information exchange, alongside data analytics and "Data as a Service" offerings for lenders to access vital origination insights. Intercontinental Exchange, Inc. was established in 2000 and maintains its headquarters in Atlanta, Georgia.

Cincinnati Financial is explicitly identified as a P&C insurer with the structural advantage of investing policyholder-funded premiums in fixed income, supporting high reinvestment leverage.

Cincinnati Financial receives a positive read-through from Travelers' sub-90% reported combined ratio, favorable reserve development and record investment income. Cincinnati is identified as a comparable P&C insurer with policyholder-funded fixed-income assets, making Travelers' results relevant to the sector's underwriting and reinvestment-income earnings framework, though the evidence is not Cincinnati-specific.

Allstate is explicitly identified as one of the four P&C insurers benefiting from policyholder-funded fixed-income portfolios, giving it high but not company-specifically quantified float leverage.

Allstate receives a positive read-through from Travelers' strong underwriting margin and higher investment income. Allstate is identified as one of the comparable P&C insurers benefiting from policyholder-float reinvestment into fixed income. The read-through is weaker than the direct Travelers effect because Allstate's product mix, catastrophe exposure and execution differ.

CME Group benefits from monetary policy uncertainty and rising rates as it drives trading and hedging volumes in its interest rate derivatives complex.

While CME earns interest on margin deposits, its core operating model is transactional rather than spread-based.

Gains transaction fees from heightened institutional rate hedging and Treasury future volumes.

CME Group operates the primary marketplace for interest rate and Treasury futures, which are the main tools used by market participants to hedge against interest rate uncertainty. The removal of forward guidance and the move toward a less predictable "data-first" framework directly increases trading and hedging volumes, driving transaction fee revenue.

The large payroll miss, higher unemployment and 60,000-job downward revision create uncertainty about the Federal Reserve path and increase demand for Treasury, SOFR and interest-rate futures, options and clearing services.

CME Group Inc., through its various subsidiaries, manages international marketplaces for the exchange of futures and options on futures contracts worldwide. Its extensive array of product offerings includes futures and options linked to a broad spectrum of underlying assets, such as interest rates, equity indices, foreign exchange, agricultural commodities, energy, and metals, alongside fixed-income products. The company additionally furnishes essential clearinghouse services, which entail the verification, settlement, and guarantee of futures, options, and cleared swap agreements traded across its venues. It also offers services for transaction processing and risk mitigation. Furthermore, the organization provides diverse market data services, encompassing both real-time and historical data feeds. Its wide-ranging client base consists of professional traders, financial institutions, both institutional and individual investors, corporations, manufacturers, producers, governments, and central banks. Founded in Chicago, Illinois, in 1898, the enterprise was formerly known as Chicago Mercantile Exchange Holdings Inc. before rebranding as CME Group Inc. in July 2007.

Nordnet’s business model explicitly includes net interest income on client deposits and margin lending, indicating substantial client-cash sensitivity.

Avanza explicitly attributed the reported income growth mainly to net interest income, making client cash and rate-sensitive balances a major earnings pathway.

Insurance companies manage vast premium floats, allowing them to reinvest cash inflows at higher yield levels when yields rise, boosting margins.

Property-and-casualty insurers can reinvest premium float at higher rates as Treasury yields rise. Chubb therefore has a positive net-investment-income channel, though existing bond valuations and broader credit conditions remain offsets.

Travelers directly reported record pretax net investment income of $1.098 billion, up 6%, demonstrating high current leverage to investment income from insurance assets.

Travelers is the direct beneficiary of the Q3 disclosure. Its 86.8% reported and 84.1% underlying combined ratios indicate strong underwriting profitability, while record investment income adds an earnings tailwind. Favorable reserve development and substantial share repurchases further support reported earnings and capital return.

MUFG has strong positive sensitivity because domestic floating-rate loan yields reprice faster than ordinary deposit costs, expanding net interest margins.

Retail banks are the primary beneficiaries of rate hikes via expanding net interest margins.

As a major European commercial bank, UniCredit is a direct beneficiary of the ECB's rate hike. Higher policy rates allow for the expansion of net interest margins (NIM) as the bank reprices its loan portfolio more rapidly than its deposit base.

EWBC is the direct beneficiary of the new information. It raised full-year net interest income growth guidance to 9%-10% while reporting record revenue, net income, loans and deposits. Positive asset repricing, falling average deposit costs, residential-mortgage-led loan growth and lower charge-off guidance support higher interest revenue, funding profitability and lower provision risk.

Commercial-loan yields can reprice quickly, but deposit competition and credit provisions develop over subsequent quarters.

Citizens can initially benefit as commercial-loan yields reprice higher while deposit costs stabilize, supporting net interest margin. Deposit competition, commercial-real-estate exposure, and higher credit provisions make the net benefit modest.

Renaissance Insurance has material fixed-income asset exposure, so elevated yields support investment income and reinvestment returns, although it does not have the direct loan repricing of a bank.

The higher-than-previously-expected 2027 rate path keeps Russian fixed-income reinvestment yields elevated for Renaissance Insurance, supporting investment income. Inflation and bond mark-to-market volatility are offsets, so the net effect is weakly positive rather than strongly positive.

Megabanks capture net interest spread expansion when yields rise, as commercial loan rates adjust upward faster than interest on deposits.

Large banks benefit from a 'higher-for-longer' rate environment triggered by persistent inflation. This allows them to maintain elevated loan yields while deposit costs remain relatively stable, leading to net interest margin (NIM) expansion.

A 'hot' labor market reinforces a 'higher-for-longer' interest rate environment, which supports wider net interest margins (NIM) for large banks as loan yields remain elevated while deposit costs stabilize.

Prudential primarily benefits through higher reinvestment coupons and net investment income on its fixed-income insurance portfolio.

Prudential and other life insurers benefit from persistent high interest rates, which allow them to reinvest their massive fixed-income portfolios at more attractive yields, boosting net investment income.

MetLife benefits through higher reinvestment income on premium float and improved spreads against long-dated liabilities.

Life insurance companies are primary beneficiaries of a 'higher-for-longer' interest rate environment. They collect premiums and invest the float in fixed-income securities; higher rates allow them to reinvest at much more attractive yields, significantly boosting investment income.

Supported net interest margins from prolonged elevated or rising interest rates, as it allows lending products to reprice faster than deposit liabilities.

National Australia Bank stands to see supported net interest margins from prolonged elevated or rising interest rates, as it allows lending products to reprice faster than deposit liabilities. Nevertheless, persistent interest rate pressure reduces overall credit demand and triggers heightened competition in the retail and commercial banking sectors, putting a cap on long-term cash earnings.

A higher-for-longer rate path can preserve loan yields and net interest margin, although weaker credit demand and asset quality are offsets.

Deposit repricing begins quickly after a rate move, while commercial-real-estate provisions and credit deterioration generally emerge with a longer lag.

JPMorgan's NII performance improves confidence that loan growth and balance-sheet repricing remain supportive for commercial banks. M&T is exposed to the same NII channel, although its higher deposit beta and commercial-real-estate exposure make the benefit less certain.

NII growth supported by fixed asset repricing and managed deposit betas.

Wells Fargo is a large commercial bank exposed to the higher-rate repricing channel. Higher loan yields can support net interest income, although deposit competition, mortgage sensitivity and potential credit deterioration make the benefit modest.

LSEG gains from increased macro hedging activity and clearing volume under higher interest rate environments.

LSEG earns interest spreads on collateral clearing but relies heavily on recurring subscriptions and data services.

Floating-rate domestic loans should reprice ahead of ordinary deposits, creating a meaningful net-interest-income benefit, although deposit competition and JGB losses reduce the net effect.

The increased April-hike expectation should accelerate repricing of SMFG’s domestic floating-rate corporate and consumer loans ahead of deposit funding, widening loan-to-deposit margins and net interest income. Deposit competition, JGB losses, and weaker borrowing demand temper the benefit.

ING’s euro-area loan yields can remain elevated while deposit costs reprice more gradually, creating positive but incomplete net-interest-income transmission.

Persistent above-target core inflation supports a higher-for-longer ECB rate path. ING’s euro-area loan yields and net interest income can remain elevated while deposit repricing, weaker loan demand and eventual credit losses offset part of the gain.

As a commercial bank, BBNI can benefit from loan repricing and higher asset yields when inflation limits near-term easing.

Progressive can reinvest policyholder premium float in higher-yielding fixed-income securities, supporting investment income.

Progressive can reinvest policyholder premium float into higher-coupon fixed-income securities, increasing investment income relatively quickly as portfolio cash flows mature and reinvest.

Regions can initially reprice commercial and floating-rate loans upward faster than deposits, but regional-bank deposit competition reduces the net advantage.

Regions may initially benefit as commercial and floating-rate loans reprice at higher yields. However, weaker loan demand, deposit competition and commercial-credit deterioration can offset the asset-income benefit.

Selective receives a modest positive read-through from Travelers' record investment income because it is identified as a P&C insurer with meaningful fixed-income and interest-rate sensitivity. The benefit is primarily an earnings-quality and reinvestment read-through, not a company-specific change in Selective's reported results.

Fifth Third has modest positive rate exposure because recent NIM expansion was linked to fixed-rate loan repricing and deposit-cost management.

Firm inflation and employment forecasts can keep loan yields elevated. Fifth Third recently expanded net interest margin through fixed-rate loan repricing and disciplined deposit costs, but renewed deposit competition could reverse part of the gain.

Deposit costs and loan-demand effects pass through relatively quickly, whereas commercial-credit deterioration and provisions are slower-moving.

KeyCorp may receive some loan-yield benefit from further tightening, but regional-bank deposit repricing and commercial-real-estate exposure can offset the initial net-interest-income improvement.

Citigroup is among the major banks expected to receive an incremental net-interest-income benefit from higher rates as floating-rate loans and new originations reprice. Funding costs and credit deterioration constrain the net effect.

Presurance Holdings, Inc. is an insurance holding company that specializes in underwriting and providing niche property and casualty insurance solutions. These offerings encompass residential coverage like homeowners and dwelling fire policies, as well as liability protection, catering to the needs of both private individuals and small to mid-sized commercial enterprises.

ADP experiences minor positive sensitivity because it earns interest on client payroll funds (float), although its primary operational health is headcount-driven.

Automatic Data Processing, Inc. (ADP) is a global provider of cloud-based solutions designed for human capital management (HCM). The company organizes its operations into two primary segments: Employer Services and Professional Employer Organization (PEO). Through its Employer Services division, ADP delivers strategic, cloud-powered platforms and comprehensive human resources (HR) outsourcing. This encompasses a wide array of services such as payroll processing, benefits administration, talent acquisition and management, general HR and workforce management, insurance, retirement planning, and regulatory compliance, often integrated into holistic HCM solutions. Conversely, the Professional Employer Organization (PEO) segment specializes in offering HR outsourcing to small and mid-sized businesses, leveraging a co-employment framework. This segment's offerings span robust benefits packages, regulatory protection and compliance, talent engagement strategies, specialized HR expertise, all-encompassing outsourcing, and even recruitment process outsourcing. Established in 1949, ADP maintains its corporate headquarters in Roseland, New Jersey.