3 bank ETFs offering added value as Fed reports higher rates in 2022
Yesterday, the Fed kept its key rates unchanged, close to zero. However, the central bank should start cutting monthly asset purchases, some believe as early as November. However, no precise date has been given.
The Fed statement pointed out:
“The risks to the economic outlook remain. The committee seeks to achieve maximum employment and inflation at the rate of 2% in the longer term. “
It has increased 5.3% in the past 12 months. So Wall Street expects the Fed to start raising interest rates in the coming months. In this case, financial stocks, put under pressure in recent weeks, could benefit.
Therefore, today we are featuring three exchange-traded funds (ETFs) that may be of interest to investors who believe banks will create shareholder value in the last quarter of the year.
1. SPDR funds for the selected financial sector
Current price: $ 37.11
52 week range: $ 22.94 – $ 39.04
Dividend yield: 1.62%
Expense ratio: 0.12% per year
The SPDR® Financial Select Sector Fund (NYSE 🙂 invests in many of the major banks and financial institutions in the United States. The fund was listed for the first time in December 1998.
XLF owns 65 holdings and the top 10 names represent approximately 60% of the $ 38.4 billion net assets. In terms of sectors, we see banks (37.33%), followed by companies operating in the capital markets (27.03%) and insurance companies (17.24%).
The main names on the list are those of Warren Buffett Berkshire Hathaway (NYSE :), JPMorgan Chase (NYSE :), Bank of America (NYSE :), Wells fargo (NYSE 🙂 and Morgan stanley (NYSE :).
The ETF is up 27.64% this year and 52.53% in the last 52 weeks. It hit a record high on August 30. Since then the fund has lost around 5%. The leakage P / E and P / B ratios are 13.10x and 1.58x. Interested readers might consider investing around these levels.
2. iShares US Regional Banks ETF
Current price: $ 57.26
52 week range: $ 30.65 – $ 62.94
Dividend yield: 2.07%
Expense ratio: 0.41% per year
The IShares ETF American regional banks (NYSE 🙂 invests in regional banks in the United States. The ETF started trading in May 2006 and has net assets of $ 1.16 billion.
IAT weekly chart.
IAT, which owns 39 participations, tracks the returns of . Since the top 10 stocks represent over 65% of the fund, it is also a top ETF.
Among the big names are PNC Financial Services (NYSE :), US Bancorp (NYSE :), Financial Trust Company (NYSE :), Bank of the First Republic (NYSE 🙂 and SVB Financial Group (NASDAQ :).
Since the start of the year, the IAT has returned over 26.5% and is up almost 79% in the past 12 months. The fund hit a record high in May. But since then it has lost about 9.5% of its value.
The P / E and P / B tracking ratios are 19.41x and 1.45x respectively. Given the recent profit taking, long investors might consider buying the lows.
3. ETF iShares US Broker-Dealers & Securities Exchanges
Current price: $ 104.94
52 week range: $ 58.89 – $ 111.17
Dividend yield: 1.01%
Expense ratio: 0.41% per year
The IShares ETF US Broker-Dealers & Securities Exchanges (NYSE 🙂 gives exposure to US investment banks, discount brokerage houses, and stock exchanges.
IAI, which owns 25 participations, monitors the returns of . The fund began trading in May 2006 and has approximately $ 859 million in assets.
In terms of sub-sector breakdown, the investment banking and brokerage segment constitutes the highest tranche, with 77.26%. Next is the financial and data exchanges segment, with 22.25%. The top 10 companies in the fund represent 78% of the fund.
Morgan stanley (NYSE :), Goldman Sachs (NYSE :), LPL Financial (NASDAQ :), Cboe Global Markets (NYSE :), Nasdaq Inc (NASDAQ 🙂 and Charles Schwab (NYSE 🙂 lead names in the ETF.
Over the past year, the fund has grown by around 72.1% and returned 31.5% in 2021. IAI also posted a record high on August 30, but has lost around 6% since then.
The P / E and P / B tracking ratios are 18.35s and 2.30x. Potential investors might see a dip towards the $ 100 level as a better entry point.