At some point, higher interest rates may become a negative for banks, but not for a while.
The Federal Reserve has been steadily raising short-term rates even as long-term rates have barely budged. The result has been a flattening of the yield curve, which conventional wisdom says should be strongly negative for banks. Banks make money by taking short-term deposits and extending longer-term loans, the reasoning goes. So when short-term interest rates are rising and long-term rates aren’t, it ought to squeeze bank margins.