After the Bank of Japan raised its policy rate to 1.25% in September 2026, bank stocks fell approximately 9–16% between 25 September and 20 October. The five top picks have nevertheless maintained their earnings forecasts and dividend projections.
The Bank of Japan raised its policy rate from 1.0% to 1.25% in September 2026, and bank stocks came under downward pressure as their performance reflected expectations for the outlook around interim earnings announcements and improvements in capital efficiency. In particular, movements in each bank’s interest income and deposit costs will be important. The period leading up to the earnings announcements will test the extent to which the effects of the rate hike are reflected in actual results.
The five top picks declined approximately 9–16% when comparing their closing prices on 25 September and 20 October, but their first-half earnings plans and dividend projections have been maintained. How the outlook for the second half is presented in the interim results is expected to be a key factor in investment decisions.
The focus in the earnings results will be whether growth in lending revenue leads to higher earnings and increased dividends. Whether the rate hike outpaces higher deposit costs will affect performance. Depending on the share-price reaction after the earnings announcements, staggered purchases in multiple tranches may be worth considering.
When selecting bank-related stocks, investors should bear in mind that megabanks and regional banks have different earnings structures and growth drivers, while also focusing on ROE, PBR and dividend policies. From a medium- to long-term perspective, it is necessary to assess overall the sustainability of earnings growth and shareholder returns during a rate-hike cycle.