The Zhitong Finance App learned that Deutsche Bank recently released an industry research report focusing on the capital pressure faced by major US banks in the context of a sharp rise in interest rates in the third quarter of 2026, using two sets of calculation models to assess the impact of interest rate fluctuations on core Tier 1 capital (CET1) through other comprehensive income (AOCI), and to investigate the evolution of banks' stock repurchase policies.
In the previous three-quarter earnings forecast report, Deutsche Bank estimated that rising interest rates would put an average pressure of 51 basis points on the book capital covered by banks, including AOCI adjustments. In order to improve the calculation logic, the report introduced a second estimation method: instead of only measuring the profit and loss of marketable securities (AFS), the actual change data of AOCI in the first half of 2026 was used, combined with the objective fact that interest rate increases in the third quarter were about 3 times that of the first half of the year, and multiplied by a factor of 3 to extrapolate capital damage in the third quarter. The results obtained by the two methods were generally close to the average capital shock in the industry, but there was significant differentiation in the calculation results of individual banks.
Under the new model, capital pressure on investment banks (Goldman Sachs, Morgan Stanley), J.P. Morgan Chase, Bank of America, and Wells Fargo had the biggest adjustments; the overall average impact of large regional banks was only 2 basis points different, but internal fragmentation was obvious. The capital pressure on CFG, FITB, and USB declined markedly, while the capital losses calculated by MTB, RF, and TFC were even higher.
Banks may slow/suspend share repurchases until interest rates stabilize
Although capital estimation results show that the absolute value of each bank's capital still meets regulatory requirements, interest rates are rising rapidly, interest rate prospects are highly uncertain, and superimposed loan growth remains strong. Deutsche Bank judges that most banks will slow down or even suspend share repurchases. To restart repurchases and return to the middle single digit level, we need to wait for interest rates to stabilize; in the long term, if regulatory capital rules are implemented and the Fed's annual stress tests are moderately relaxed and transparency is improved, the scale of repurchases is expected to rise further.
The banking community will be divided: monetary central banks such as J.P. Morgan Chase, Bank of America, and Wells Fargo will slow down the pace of repurchases, but they will not completely stop. The judgment is based on sufficient capital base and strong profitable hematopoietic capacity at the end of June. At the same time, banks need to continue to expand public and consumer credit to service institutional customer transactions and financing needs.
On the other hand, looking at large regional banks, 7 of the 9 covered by Deutsche Bank had simulated capital at or below 9.0% after factoring in the AOCI impact, and are likely to choose to suspend repurchases. Among them, MTB's capital buffer is sufficient, and there are still conditions to maintain repurchases; the USB capital level is close to the threshold, while business expansion and bank category adjustments are being promoted, and capital constraints are strong.
The bank also discussed asset valuation issues that are currently being discussed in the market: currently, only large systemically important banks include AOCI as regulatory capital, and future regulatory rules may expand the scope of application; losses held to maturity securities (HTM) will not be included in capital adjustments by regulatory and rating agencies, and will only be referred to by market investors; low-cost deposits on the debt side are not adjusted in market value, but this part of the debt has actual value in a high interest rate environment.