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If there ever was a market sector that can be described as “rising from ruins,” it is the banking sector. Even after suffering a crushing blow in 2008 due to the subprime mortgage crisis that wiped out many giants in the sector and brought other bank CEOs to their knees, begging Congress for a bailout, the financial sector still contains some of the largest and most important companies in the world.
But we’re not interested in those that are “too big to fail” here.
Instead, we’re interested in the regional banking sector, as demonstrated by the exchange-traded fund (ETF) SPDR S&P Regional Banking ETF (NYSEARCA: KRE). These were also in the news recently, as some of them reported stability issues, largely due to rising interest rates and economic problems, culminating in the collapse of First Republic Bank, Silicon Valley Bank and Signature Bank in 2023. Thankfully, those days seem to be behind us, and with interest rate cuts on the horizon, some investors are returning to these smaller banks.
For those who are subscribers to my newsletter, Successful Investing (and if you aren’t, why aren’t you?), you might already know about this ETF, as it is in our portfolio. For others, KRE seeks to generate results that approximate, as much as possible, the S&P Regional Banks Select Industry Index. The fund’s managers use a modified equal-weight index, which allows the fund to add banks of all capitalizations to its basket.
Some of the companies whose stocks are in its portfolio include: Columbia Banking System Inc. (NASDAQ: COLB), Western Alliance Bancorp (NYSE: WAL), Valley National Bancorp (NASDAQ: VLY), Truist Financial Corp. (NYSE: TFC), Citizens Financial Group (NYSE: CFG), Zions Bancorp NA (NASDAQ: ZION), M + T Bank Corp. (NYSE: MTB), Synovus Financial Corp. (NYSE: SNV) and East West Bancorp Inc. (NASDAQ: EWBC).
As of August 6, KRE has been up 9.45% over the past month and up 5.72% for the past three months. It is currently up 1.71% year to date.
Chart courtesy of www.stockcharts.com
The fund has amassed $3.11 billion in assets under management and has an expense ratio of 0.35%.
Overall, the KRE ETF may be a good choice for investors looking for exposure to regional banks, but it’s important to carefully consider the risks and potential returns before making any investment decisions.
As always, I’m happy to answer any of your questions about ETFs, so do not hesitate to email me. You may see your question answered in a future ETF Talk.
