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Top-Ranked Bank ETFs & Stocks Set to Explode Higher
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The banking corner of the financial sector is looking solid thanks to strong earnings, rising interest rates, easing of financial regulation and a stronger economy that is driving demand from borrowers, while holding down loan loss rates.
This is especially true as U.S. banks delivered a record profit of $60.2 billion in the second quarter, representing an increase of 25% from the year-ago quarter, per the Federal Deposit Insurance Corporation (FDIC). Most of the growth was attributable to lower tax rates and higher net interest income. Notably, the tax cuts boosted bank profits by a $6.5 billion for the quarter. Over 70% of the banks reported year-over-year growth in interest income, while just 3.8% reported net losses (read: Bank ETFs Rise on the Wave of Big Releases).
Banks have also set records for quarterly revenue in each of the past two quarters, a new peak for a year-long boom in financial sector profits.
A rising rate environment is highly beneficial for banks. This is because they seek to borrow money at short-term rates and lend at long-term rates. With the steep rise in long-term interest rates, banks would be able to earn more on lending and pay less on deposits. This would expand net margins and bolster banks’ profits. The Fed has raised interest rates twice this year and is expected to make a third-rate hike as soon as September and further more in December.
The latest Fed minutes show that the central bank will continue raising interest rates as long as the economy stays healthy. Current market odds are signaling a 96% probability of a rate hike in September and 60% chance of another in December (read: September Rate Hike Odds High: Bet on These ETFs).
Given bullish fundamentals, we have highlighted a few top-ranked ETF and stock picks from this corner of the market that are expected to explode higher in the coming months.
With AUM of $5.5 billion, this fund offers exposure to 124 regional banks, with each holding less than 2% share. It follows the S&P Regional Banks Select Industry Index, charging investors 35 basis points a year in fees. The fund has risen 8.9% so far this year and has a Zacks ETF Rank #1 (Strong Buy).
This fund follows the KBW Regional Banking Index, holding 50 stocks in its basket, with each accounting for less than 3.8% share. It is a relatively less popular and less liquid option in the space, with AUM of $198.4 million and 35 bps in fees per year. The fund is up 7.4% in the year-to-date time frame and has a Zacks ETF Rank #2 (Buy).
This fund offers equal-weight exposure to 80 banking stocks by tracking the S&P Banks Select Industry Index. Regional banks dominate the portfolio with 77.3% share while thrifts & mortgage finance, diversified banks, asset management & custody banks and other diversified financial services take the remainder. It has amassed $3.7 billion in its asset base and has gained 5.7% so far this year. It carries a Zacks ETF Rank #2 (read: Top-Ranked Sector ETFs to Buy for Q3).
This fund provides exposure to the 24 leading national money centers and regional banks or thrifts by tracking the KBW Bank Index. It is concentrated on the top five firms that make up for more than 8% share each. The fund has managed $1 billion in its asset base and charges 0.35% in expense ratio. KBWB has added 4.3% in the year-to-date time frame and has a Zacks ETF Rank #2.
This company provides various financial services for consumers, businesses, corporations, and institutions in the United States. The stock saw positive earnings estimate revision of 4 cents for this year over the past month with an expected earnings growth rate of 38.86%. It has market cap of $34.3 billion and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
It is a leading provider of wealth management, asset servicing, asset management and banking to corporations, institutions, affluent families and individuals. The Zacks Consensus Estimate for 2018 has been revised up by three cents over the past 30 days and represents substantial year-over-year growth of 37.27%. The stock has a market cap of $24.2 billion and Zacks Rank #2.
This company provides various financial products and services. It saw positive earnings estimate revision of 5 cents for this year over the past month and has an expected earnings growth rate of 49.16%. Comerica has a Zacks Rank #1 and market cap of $17 billion (read: Reginal Bank ETFs & Stocks to Party on Dodd-Frank Easing).
This bank holding company provides banking services, trust and investment services, commercial insurance premium financing, short-term accounts receivable financing, and certain administrative services. The company has seen positive earnings estimate revision of eight cents for this year over the past 30 days and has an expected earnings growth rate of 36.82%. Wintrust Financial carries a Zacks Rank #2 and has a market cap of $5.2 billion.
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Top-Ranked Bank ETFs & Stocks Set to Explode Higher
The banking corner of the financial sector is looking solid thanks to strong earnings, rising interest rates, easing of financial regulation and a stronger economy that is driving demand from borrowers, while holding down loan loss rates.
This is especially true as U.S. banks delivered a record profit of $60.2 billion in the second quarter, representing an increase of 25% from the year-ago quarter, per the Federal Deposit Insurance Corporation (FDIC). Most of the growth was attributable to lower tax rates and higher net interest income. Notably, the tax cuts boosted bank profits by a $6.5 billion for the quarter. Over 70% of the banks reported year-over-year growth in interest income, while just 3.8% reported net losses (read: Bank ETFs Rise on the Wave of Big Releases).
Banks have also set records for quarterly revenue in each of the past two quarters, a new peak for a year-long boom in financial sector profits.
A rising rate environment is highly beneficial for banks. This is because they seek to borrow money at short-term rates and lend at long-term rates. With the steep rise in long-term interest rates, banks would be able to earn more on lending and pay less on deposits. This would expand net margins and bolster banks’ profits. The Fed has raised interest rates twice this year and is expected to make a third-rate hike as soon as September and further more in December.
The latest Fed minutes show that the central bank will continue raising interest rates as long as the economy stays healthy. Current market odds are signaling a 96% probability of a rate hike in September and 60% chance of another in December (read: September Rate Hike Odds High: Bet on These ETFs).
Given bullish fundamentals, we have highlighted a few top-ranked ETF and stock picks from this corner of the market that are expected to explode higher in the coming months.
SPDR S&P Regional Banking ETF (KRE - Free Report)
With AUM of $5.5 billion, this fund offers exposure to 124 regional banks, with each holding less than 2% share. It follows the S&P Regional Banks Select Industry Index, charging investors 35 basis points a year in fees. The fund has risen 8.9% so far this year and has a Zacks ETF Rank #1 (Strong Buy).
Invesco KBW Regional Banking ETF (KBWR - Free Report)
This fund follows the KBW Regional Banking Index, holding 50 stocks in its basket, with each accounting for less than 3.8% share. It is a relatively less popular and less liquid option in the space, with AUM of $198.4 million and 35 bps in fees per year. The fund is up 7.4% in the year-to-date time frame and has a Zacks ETF Rank #2 (Buy).
SPDR S&P Bank ETF (KBE - Free Report)
This fund offers equal-weight exposure to 80 banking stocks by tracking the S&P Banks Select Industry Index. Regional banks dominate the portfolio with 77.3% share while thrifts & mortgage finance, diversified banks, asset management & custody banks and other diversified financial services take the remainder. It has amassed $3.7 billion in its asset base and has gained 5.7% so far this year. It carries a Zacks ETF Rank #2 (read: Top-Ranked Sector ETFs to Buy for Q3).
Invesco KBW Bank ETF (KBWB - Free Report)
This fund provides exposure to the 24 leading national money centers and regional banks or thrifts by tracking the KBW Bank Index. It is concentrated on the top five firms that make up for more than 8% share each. The fund has managed $1 billion in its asset base and charges 0.35% in expense ratio. KBWB has added 4.3% in the year-to-date time frame and has a Zacks ETF Rank #2.
SunTrust Banks Inc. (STI - Free Report)
This company provides various financial services for consumers, businesses, corporations, and institutions in the United States. The stock saw positive earnings estimate revision of 4 cents for this year over the past month with an expected earnings growth rate of 38.86%. It has market cap of $34.3 billion and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Northern Trust Corporation (NTRS - Free Report)
It is a leading provider of wealth management, asset servicing, asset management and banking to corporations, institutions, affluent families and individuals. The Zacks Consensus Estimate for 2018 has been revised up by three cents over the past 30 days and represents substantial year-over-year growth of 37.27%. The stock has a market cap of $24.2 billion and Zacks Rank #2.
Comerica Incorporated (CMA - Free Report)
This company provides various financial products and services. It saw positive earnings estimate revision of 5 cents for this year over the past month and has an expected earnings growth rate of 49.16%. Comerica has a Zacks Rank #1 and market cap of $17 billion (read: Reginal Bank ETFs & Stocks to Party on Dodd-Frank Easing).
Wintrust Financial Corporation (WTFC - Free Report)
This bank holding company provides banking services, trust and investment services, commercial insurance premium financing, short-term accounts receivable financing, and certain administrative services. The company has seen positive earnings estimate revision of eight cents for this year over the past 30 days and has an expected earnings growth rate of 36.82%. Wintrust Financial carries a Zacks Rank #2 and has a market cap of $5.2 billion.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>