Market Overview

Regional Bank ETFs: What Investors Need To Know

Share:

Regional banks ETFs are rising this week. There are many reasons behind this trend.

The economy is gaining momentum and most of the recent economic reports, including the jobs report, have been better than expected. Regional banks benefit from an improving economy as loan growth picks up.

And rates are rising. The 10-year note yield, which was around 2.4% at the beginning of the year had surged to over 3.1% last month. It has since come down to around 2.95%, mainly due to geopolitical concerns.

Rates have been inching higher again after the jobs report and the Fed appears all set to raise rates at its meeting next week.

Last month, the congress approved the biggest roll-back of Dodd-Frank reforms that were enacted in the aftermath of the financial crisis. Small and regional banks are set to benefit from easing of these regulations.

A strong economy and higher interest rates benefit all banks but regional banks stand to benefit more since interest rate spread is their main source of earnings.

The SPDR S&P Regional Banking ETF (NYSE: KRE) is the most popular ETF in the space with $5.2 B in AUM. It's an equal-weighted ETF with 120 holdings.

The iShares U.S. Regional Banks ETF (NYSE: IAT) has 53 holdings and top three holdings—U.S. Bancorp (NYSE: USB), PNC Financial (NYSE: PNC) and BB&T (NYSE: BBT)—account for more than one-third of assets.

The PowerShares KBW Regional Banking Portfolio (NASDAQ: KBWR) also follows equal-weighing methodology. It has 50 holdings and higher exposure to small and micro-cap banks than the other two.

Related Links:

What's The Volcker Rule, And Why Are Banks Celebrating The Fed's Proposed Changes?

JPMorgan, HSBC, Citigroup, Early Warning Execs Talk Fintech Collaboration

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: contributor contributorsNews Sector ETFs Specialty ETFs ETFs

 

Related Articles (IAT + BBT)

View Comments and Join the Discussion!
Fastest Market News Application
You'll Hear It First On Pro
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com

Pot Stocks, ETFs, Top News And Data From The Cannabis Industry This Week

Today In Cryptocurrency: Crypto Crime Rises In India, PotCoin Sends Dennis Rodman To North Korea Summit