3 Banking And Financial Stocks To Watch If Interest Rates Move Higher

With Dallas Fed President Lorie Logan arguing that interest rates may need to move modestly higher to tackle inflation stuck above the 2% target, the ground is shifting for banks and financial stocks. Higher rates can lift some revenue streams while also putting pressure on funding costs and valuations. To help you think through where the potential opportunities and risks might sit, this article looks at three large, financially healthy banking and financial stocks from our screener that appear more directly exposed to this rate hike discussion and why the current backdrop could matter for each one.

FirstSun Capital Bancorp (FSUN)

Overview: FirstSun Capital Bancorp is a regional banking group that, through Sunflower Bank, provides a wide range of commercial and consumer banking services, including business loans, mortgages, and everyday banking products, to customers across Texas, Kansas, Colorado, New Mexico, Arizona, California, and Washington. It complements this with wealth management and trust services for individuals, businesses, and institutions.

Operations: FirstSun generates about US$324.6m of revenue from its core Banking segment and US$83.2m from Mortgage Operations, with all US$404.0m of revenue coming from customers in the United States.

Market Cap: US$1.65b

Investors looking at FirstSun Capital Bancorp in light of potential rate hikes may find an interesting mix of growth and risk. The bank has been expanding across high growth Sun Belt and California markets, and is leaning into relationship banking and fee income, with non interest revenue now above 25% of total revenue. Analysts expect strong earnings and revenue growth and see upside to their price targets. At the same time, recent borrower fraud and higher charge offs, past shareholder dilution, and a relatively low 8.2% ROE highlight that this is not a simple story. The key consideration is whether FirstSun’s growth plans and balance sheet strength are enough to offset these credit and execution concerns as rates move higher.

FirstSun’s expanding footprint and fee income mix could be masking a very different earnings path as rates shift. Before you decide how it fits your portfolio, review the analyst forecasts for FirstSun Capital Bancorp that could change the story at the next turn.

Hagerty (HGTY)

Overview: Hagerty provides insurance and membership services focused on collector cars and enthusiast vehicles, bundling coverage with perks such as roadside assistance, a drivers club magazine, access to specialist events, and tools for valuing and trading classic vehicles across the United States, Canada, and the United Kingdom.

Operations: Hagerty generates US$523.1m of revenue from the United States, US$67.2m from international markets, and US$849.5m that is unallocated geographically.

Market Cap: US$4.02b

Hagerty stands out in the Banking and Financial Sector Stocks screener because it blends insurance, membership subscriptions and a marketplace for high end vehicles, all tied to a loyal community of car enthusiasts. The company reports that earnings growth forecasts are strong and ROE is projected to rise sharply, but the stock currently trades on a rich P/E and relies entirely on external borrowing rather than low cost customer deposits, which increases funding risk as rates move higher. The push into Europe, auctions and services like the Bennetts motorcycle acquisition could deepen fee based income, yet soft classic car valuations and higher retained underwriting risk may leave less room for error if claims or demand are weaker than expected.

Hagerty’s combination of high growth expectations, rich P/E and niche enthusiast focus may be obscuring where the real payoff sits. Get the full story in the analyst forecasts for Hagerty before the next twist in the thesis emerges.

Coastal Financial (CCB)

Overview: Coastal Financial is a Washington based bank holding company that runs Coastal Community Bank, offering everyday deposit accounts, business banking and a wide range of loans to consumers and small to medium sized businesses, alongside a Banking as a Service platform that lets fintech and digital partners plug into its banking infrastructure.

Operations: Coastal Financial generates about US$255.5m of revenue from its CCBX Banking as a Service platform, US$90.7m from its Community Bank and US$17.2m from Treasury & Administration, with all US$363.3m of revenue coming from customers in the United States.

Market Cap: US$1.20b

Coastal Financial sits at the intersection of a traditional community bank and a Banking as a Service platform. Some investors may see it as more than a typical regional lender as higher rates support net interest margins. Forecast earnings and revenue growth are described as being ahead of broad US market expectations, the stock is estimated to trade below DCF fair value, and analysts have become more positive on earnings with price targets reported to be above the current share price. At the same time, net profit margins have eased, ROE remains below double digits and net charge offs are still material, so credit quality and execution on partnerships like Pliant are key variables for anyone weighing potential upside against the risks.

Coastal Financial’s banking as a service engine could be masking where the real growth optionality sits. Before the market fully prices that in, walk through the analyst forecasts for Coastal Financial that could flip the risk reward picture.

The three stocks here are just a starting point, because the full Banking and Financial Sector Stocks screener surfaced 38 more large, financially healthy banking and financial companies with equally compelling narratives that might fit your view on rates and risk.

Use Simply Wall St to identify and analyze the specific catalysts, balance sheet strength and earnings stories that matter to you so you can focus on the highest conviction opportunities in this space.

Take Control of Your Investment Journey

If Hagerty or any of these companies sound like a great opportunity, register for FREE with Simply Wall St and add your companies to a Watchlist to monitor the share price against the fair value the ideal entry point. Once you've made your move, manage your holdings with our Portfolio Command Center that filters out the noise to deliver only the most critical, actionable updates. Throughout your journey, our Community allows you to filter the best ideas from thousands of investor perspectives. By uncovering hidden catalysts and risks early, you'll accelerate your decision-making and stay one step ahead of the market.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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