With the Fed weighing another possible rate hike in September, inflation still above target and war with Iran keeping energy markets on edge, short term interest rates sit at the center of the story again. This mix can rattle growth stocks; yet it can also open space for certain financials to use higher rates to their advantage. This article walks through three U.S. financial stocks that may benefit from higher short term interest rates and are closely tied to this news backdrop.

The three stocks below are a starting sample, while the full quantitative screen surfaced 13 more U.S. financial companies with similarly compelling stories around higher short term rates that are not covered here. If you want to identify and analyze those additional candidates side by side, head straight to the U.S. Financials Benefiting From Higher Short-Term Interest Rates screener.

Inter & Co (INTR)

Overview: Inter & Co is a Brazil based digital financial platform that combines banking, cards, loans, investing, insurance and a marketplace for goods and services across Brazil and the United States. It aims to keep customers inside one ecosystem for everyday spending, saving and protection products through its app centered model.

Operations: Inter & Co generates most of its roughly R$6.7b in revenue from Banking & Spending at about R$5.5b, with smaller contributions from Inter Shop at about R$424m, other services at about R$706m, investments at about R$256m and insurance brokerage at about R$252m, almost entirely in Brazil.

Market Cap: US$2.3b

Inter & Co sits at the intersection of rising digital banking adoption in Latin America and a rate backdrop that can support higher yields on interest earning assets. The company is building deeper relationships with more than 40 million clients through payments, lending, investments and insurance. This can lift revenue per customer and margins when cross sell works well. At the same time, the loan book carries a high bad loans ratio and relatively low coverage, so elevated rates or a weaker credit cycle could hit earnings harder than at more conservative banks. For investors, the mix of strong recent profitability metrics, growing US presence and real credit risk makes Inter & Co a higher risk but potentially rewarding candidate worth closer inspection.

Inter & Co’s accelerating app led ecosystem and expanding US presence can look exciting when rates stay higher. However, the real story sits in the balance between strong metrics and real credit risk in the 4 key rewards and 2 important warning signs

Build your own higher rate financials shortlist

Inter & Co and the two other stocks in this article all came out of a single Simply Wall St screen, but the real edge comes when you shape the filters yourself. Use our flexible Screener to mix metrics like valuation, growth, balance sheet strength and risks around higher rates, or lean on our curated Investing Ideas if you want ready made shortlists to review.

Bank of N.T. Butterfield & Son (NTB)

Overview: Bank of N.T. Butterfield & Son is a Bermuda headquartered bank that focuses on community, commercial and private banking, serving individuals and small to medium sized businesses with deposits, loans, cards and wealth services across multiple offshore financial centers.

Operations: Bank of N.T. Butterfield & Son generates about US$625 million in revenue almost entirely from banking activities, with key markets including Bermuda, the Cayman Islands and the Channel Islands and the UK.

Market Cap: US$2.5b

Bank of N.T. Butterfield & Son offers a mix for investors watching higher short term rates. A large portion of earnings is linked to loan pricing and yields on interest earning assets, while a significant fee base from wealth and trust services in places like Bermuda, Cayman and the Channel Islands adds some balance. Analysts have highlighted earnings growth potential and a high forecast ROE, and the bank currently screens as undervalued on several metrics. At the same time, a relatively high level of bad loans, questions around the stickiness of some deposits and recent insider selling mean funding and credit quality need close attention. The full story sits in how this bank manages those risks while its asset yields continue to reprice.

Bank of N.T. Butterfield & Son sits at the crossroads of higher rate earnings power and questions around deposit stickiness and credit quality. Get the full context in the 5 key rewards and 3 important warning signs

Community West Bancshares (CWBC)

Overview: Community West Bancshares is the holding company for Community West Bank, a Central California based lender that provides checking, savings and time deposit accounts alongside commercial, real estate, agricultural, SBA and consumer loans, plus cash management and digital banking services for local businesses and individuals.

Operations: Community West Bancshares generates about US$157 million in revenue from its core banking operations in the United States.

Market Cap: US$691 million

Community West Bancshares gives you a traditional regional banking story closely tied to net interest margin at a time when the Fed looks set to keep short term U.S. rates higher for longer. Earnings growth over the past year and a net profit margin above 20% sit alongside entry into the S&P Regional Banks Select Industry Index, which can help liquidity and visibility. At the same time, recent net loan charge offs moved sharply higher and shareholders were diluted over the past year, so credit quality and capital decisions matter. The stock currently screens as inexpensive relative to an internal fair value estimate, while its dividend and forecast earnings growth profile add a mix of income and potential upside that may justify closer investor attention.

Community West Bancshares combines a higher rate story with an index inclusion that many investors may be overlooking. See how the full picture of earnings, credit trends and shareholder moves fits together in the analysis report for Community West Bancshares

Seeking Alternatives Beyond These Financials

Fresh breakout ideas do not stay under the radar for long. New momentum, pricing power and stories get caught quickly. Scan these curated shortlists before the crowd and consider your options.

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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.