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Eyeing Big Bank Investing? Try This New ETF (BIGB)
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Regional and community banks lost $120 billion during the week ending March 15 after Silicon Valley Bank’s shutdown, according to Federal Reserve data released Friday, as quoted on Yahoo Finance. The 25 largest banks hauled in $67 billion in new deposits on a seasonally adjusted basis, according to new Fed data released Friday. The net outflow from all banks was $98 billion, marking an annual decline of 5.8%.
In fact, deposits started to fall across the banking industry before SVB’s failure. Total industry deposits of $17.5 trillion was the lowest count since September 2021. The Federal Reserve’s steep and rapid rate hikes have led depositors to put money into higher yielding alternatives like Treasurys. The U.S. regional banking crisis erupted in early March 2023 made the matter worse. Depositors still had faith in big banks.
The fund puts focus on big banks of the United States. There is a total of 13 stocks. Goldman Sachs Swap (13.9%), Morgan Stanley Swap (13.42%) and J.P. Morgan Chase & Co Swap (13.40%) are the top three holdings of the fund. The fund charges 29 bps in fees.
How Does It Fit In a Portfolio?
The fund gives exposure to the largest and most-liquid money center banks listed in the United States. These include six GSIBs, or Global Systemically Important Banks. GSIBs are statutorily required to carry higher capital ratios than non-GSIB institutions.
The financial sector, which accounts for around one-fifth of the S&P 500 Index, had a mixed Q4. Three out of six big U.S. banks were able to beat overall. Several banks are on a cost-cutting mode. Big banks have been involved in share repurchases too. So, these companies have the leeway to stop capital deployment toward shareholder value maximization and keep the capital cushion in decent shape, if needed.
After the financial crisis in 2008, the banking sector had faced stringent regulatory norms. The norms included stringent capital requirements, which meant banks must keep a certain amount of reserves for moments of crisis, as well as stipulations about how diversified their businesses must be.
But Silicon Valley Bank and other regional banks did not have the same regulatory scrutiny. In 2018, president Donald J. Trump signed a bill that lessened the oversight for many regional banks, per a New York Times article. Hence, unlike big banks, regional banks are in greater danger.
Though the financial earnings of big banks do not spark hope among investors, the decent valuation of the sector and chances of higher net interest rate margins in the days to come may prove to be helpful for the funds.
Any Competition?
Though the fund does not face direct competition from any players as it is first-of-its-kind, stocks that get a place in BIGB, have exposure to the likes of Invesco KBW Bank ETF (KBWB - Free Report) , iShares U.S. Financial Services ETF (IYG - Free Report) , Financial Select Sector SPDR Fund (XLF - Free Report) and First Trust Nasdaq Bank ETF (FTXO - Free Report) . Hence, these ETFs may pose some threat to the newbie.
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Eyeing Big Bank Investing? Try This New ETF (BIGB)
Regional and community banks lost $120 billion during the week ending March 15 after Silicon Valley Bank’s shutdown, according to Federal Reserve data released Friday, as quoted on Yahoo Finance. The 25 largest banks hauled in $67 billion in new deposits on a seasonally adjusted basis, according to new Fed data released Friday. The net outflow from all banks was $98 billion, marking an annual decline of 5.8%.
In fact, deposits started to fall across the banking industry before SVB’s failure. Total industry deposits of $17.5 trillion was the lowest count since September 2021. The Federal Reserve’s steep and rapid rate hikes have led depositors to put money into higher yielding alternatives like Treasurys. The U.S. regional banking crisis erupted in early March 2023 made the matter worse. Depositors still had faith in big banks.
As a result, Roundhill Investments’ new ETF The BIG Bank ETF (BIGB) appears extremely time-sensitive. Let’s delve a little deeper (read: Should You Buy the Dip in Big Bank ETFs Amid SVB Crisis?).
BIGB in Focus
The fund puts focus on big banks of the United States. There is a total of 13 stocks. Goldman Sachs Swap (13.9%), Morgan Stanley Swap (13.42%) and J.P. Morgan Chase & Co Swap (13.40%) are the top three holdings of the fund. The fund charges 29 bps in fees.
How Does It Fit In a Portfolio?
The fund gives exposure to the largest and most-liquid money center banks listed in the United States. These include six GSIBs, or Global Systemically Important Banks. GSIBs are statutorily required to carry higher capital ratios than non-GSIB institutions.
The financial sector, which accounts for around one-fifth of the S&P 500 Index, had a mixed Q4. Three out of six big U.S. banks were able to beat overall. Several banks are on a cost-cutting mode. Big banks have been involved in share repurchases too. So, these companies have the leeway to stop capital deployment toward shareholder value maximization and keep the capital cushion in decent shape, if needed.
After the financial crisis in 2008, the banking sector had faced stringent regulatory norms. The norms included stringent capital requirements, which meant banks must keep a certain amount of reserves for moments of crisis, as well as stipulations about how diversified their businesses must be.
But Silicon Valley Bank and other regional banks did not have the same regulatory scrutiny. In 2018, president Donald J. Trump signed a bill that lessened the oversight for many regional banks, per a New York Times article. Hence, unlike big banks, regional banks are in greater danger.
Though the financial earnings of big banks do not spark hope among investors, the decent valuation of the sector and chances of higher net interest rate margins in the days to come may prove to be helpful for the funds.
Any Competition?
Though the fund does not face direct competition from any players as it is first-of-its-kind, stocks that get a place in BIGB, have exposure to the likes of Invesco KBW Bank ETF (KBWB - Free Report) , iShares U.S. Financial Services ETF (IYG - Free Report) , Financial Select Sector SPDR Fund (XLF - Free Report) and First Trust Nasdaq Bank ETF (FTXO - Free Report) . Hence, these ETFs may pose some threat to the newbie.