JPMorgan Chase & Co. (JPM), U.S. Bancorp (USB), Citigroup Inc (C): Could Higher Rates Still Mean Book Value Growth for Your Bank?

Here again, JPMorgan Chase & Co. (NYSE:JPM) is considered to have the lowest estimated duration of 1.5 years, followed by Citigroup Inc (NYSE:C) at 2 years and U.S. Bancorp (NYSE:USB) at 2.5 years. Wells Fargo has the largest duration of 3.5 years.

Remember, these durations are estimated by Credit Suisse and are not reported by banks in their SEC filings.

Net interest income sensitivity

Finally, the impact on the banks’ net interest income (NII) is also important. With the rates climbing, investors should generally expect banking institutes’ barely visible net interest margin to expand and a resultant increase in the net interest income.

According to the disclosures provided by large cap banks, a 100 bps instantaneous increase in the interest rates will cause a 4.5% increase in net interest income, while U.S. Bancorp (NYSE:USB)’s investors can expect 1.8% increase in the bank’s net interest income. Citigroup Inc (NYSE:C)’s projected net interest income is expected to edge up only 0.2%, while Wells Fargo’s net interest income is not expected to be significantly different.

Conclusion

After looking at the estimates provided by Credit Suisse, I believe JPMorgan Chase & Co. (NYSE:JPM), Citigroup Inc (NYSE:C), and U.S. Bancorp (NYSE:USB) are best positioned to grow their book values given the rise in the interest rates. Besides, the aforementioned banks’ investors can also expect higher earnings potential due to the recent moves in the rates. With regards to growth in the book value, Wells Fargo remains the least preferred bank.

The article Could Higher Rates Still Mean Book Value Growth for Your Bank? originally appeared on Fool.com and is written by Adnan Khan.

Adnan Khan has no position in any stocks mentioned. The Motley Fool owns shares of Citigroup Inc (NYSE:C) and JPMorgan Chase & Co (NYSE:JPM). Adnan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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