Deutsche Bank calculates the impact of rising interest rates: U.S. major banks face capital pressure, and stock buybacks may hit the brakes collectively.

Deutsche Bank recently released an industry research report focusing on the capital pressure faced by large U.S. banks against the backdrop of a sharp rise in interest rates in the third quarter of 2026. It uses two sets of calculation models to assess the impact of interest rate fluctuations on Common Equity Tier 1 (CET1) capital through Accumulated Other Comprehensive Income (AOCI), and examines the evolution of bank stock buyback policies. In its earlier third-quarter earnings preview report, Deutsche Bank estimated that rising interest rates would put an average pressure of 51 basis points on the book capital of covered banks including AOCI adjustments. To refine the calculation logic, the report introduces a second estimation method: instead of only measuring gains and losses on available-for-sale securities (AFS), it uses actual AOCI change data from the interest rate upcycle in the first half of 2026, and, combined with the objective fact that the third-quarter rate increase was about three times that of the first half, applies a 3x multiplier to extrapolate the capital damage in the third quarter. The two methods produce broadly similar results for average industry capital impact, but individual bank estimates show significant divergence. Under the new model, the capital pressure on investment banking institutions (Goldman Sachs, Morgan Stanley), JPMorgan, Bank of America, and Wells Fargo is lower than under the old model, with Morgan Stanley and Wells Fargo showing the largest adjustments; for large regional banks, the overall average impact differs by only 2 basis points, but internal divergence is pronounced, with capital pressure at CFG, FITB, and USB declining markedly, while the estimated capital losses for MTB, RF, and TFC are instead higher. Banks may slow or suspend stock buybacks until interest rates stabilize Although the capital calculation results show that the absolute capital levels of each bank still meet regulatory requirements, the rapid rise in interest rates, highly uncertain rate outlook, and continued strong loan growth lead Deutsche Bank to judge that most banks will slow or even suspend stock buybacks. To restart buybacks and restore them to a mid-single-digit level, interest rates need to stabilize; over the longer term, if regulatory capital rules are finalized and the Federal Reserve's annual stress tests achieve moderate easing and greater transparency, buyback scale could rise further. The banking group will show divergence: money-center banks such as JPMorgan, Bank of America, and Wells Fargo will slow the pace of buybacks but will not stop them entirely. This judgment is based on their ample capital base at the end of June and strong earnings-generating capacity, while banks also need to continue expanding corporate and consumer credit and serve institutional clients' trading and financing needs. By contrast, among the nine large regional banks covered by Deutsche Bank, seven have simulated capital at or below 9.0% after including the AOCI impact, and are highly likely to choose to suspend buybacks. Among them, MTB has sufficient capital buffer and still has room to maintain buybacks; USB's capital level is close to the threshold, while it is also advancing business expansion and bank category adjustments, resulting in stronger capital constraints. The report also explores the asset valuation issue widely discussed in the market: currently only systemically important large banks include AOCI in regulatory capital, and future regulatory rules may expand the scope of application; unrealized losses on held-to-maturity securities (HTM) are not included in capital adjustments by regulators and rating agencies, and are only referenced by market investors; low-cost deposits on the liability side are not marked to market, but this portion of liabilities has real value in a high-interest-rate environment.