Financial ETF Focus: Banks and Brokers

March 4th at 12:45pm by Tom Lydon

The ETF research team at S&P Capital IQ is profiling the Market Vectors Bank & Brokerage ETF (NYSEArca: RKH), which carries a “MarketWeight” rating. The ETF holds valued financial services companies, with strong balance sheets, around the globe.

“S&P Capital IQ’s fundamental outlook for the U.S. Diversified Banks sub-industry for the next 12 months is positive, despite the upcoming economic challenges and regulatory hurdles we see. Fourth-quarter results for the three banks which comprise this sub-industry reflected higher-than-expected mortgage banking revenues and significant loan credit quality improvements. In our view, results over the next 12 months for these banks will depend on the resolution of the debt ceiling, growth of the U.S. economy, housing prices and regulatory costs,” Todd Rosenbluth wrote for S&P Capital IQ. [Regional Bank ETFs Await Their Turn]

RKH holds banking stocks that have strong levels of capital with solid fundamentals.

Some of the larger holdings include Citigroup Inc. (NYSE: C), JPMorgan Chase & Co. (NYSE: JPM) and Toronto-Dominion Bank (NYSE: TD). S&P Capital has buy recommendations on several Canadian banks due to the projected outlook for capital markets and wealth management in 2013.

Diversified banks make up the bulk of the portfolio, followed by other diversified financial services and diversified capital markets. Major countries that are represented are the United States (38%), Canada (17%), U.K.(13%) and Spain (9%). [Bank of America Leads Financial ETFs Higher]

The banking and financial service sector does exhibit greater volatility than the S&P 500 in general. Another risk to this fund is the exposure to Spanish banks. Until the Eurozone debt drama is settled, exposure to the region’s financial institutions entaisl some risk. [Bank ETFs Pressured by Rates, Loans]

Market Vectors Bank & Brokerage ETF

RKH, Sector ETFs, Global Banking ETF

 

Tisha Guerrero contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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