Regional bank stocks, as measured by the KRE ETF, are trading higher today. This move is likely driven by growing expectations of a Federal Reserve interest rate hike later this month. The probability of a September rate increase has jumped to approximately 70%, a significant rise from the 40% chance perceived just a week ago.
Higher interest rates are generally beneficial for regional banks as they can lead to an expansion of their net interest margins—the difference between the interest they earn on loans and what they pay on deposits.