Regional Bank ETFs: The Bad and the Good | ETF Trends

The financial fiasco is still too clear in our memories and some of the inimical legacies are spilling over into the regional banking industry. But, regional banks, along with related exchange traded funds (ETFs), may get a helping hand from the government.

Let’s start with the bad news.

Commercial real estate loan failures in the mid-sized regional banking industry have become a thorn in the economy’s foot, writes Andrew Smith for Newsday. According to a Wall Street rating agency’s report, commercial real estate failures will likely affect smaller banks because most of these banks have a larger portion of their portfolios allotted to commercial real estate loans. (Why regional banks are faltering).

Non-performing loans are on the increase and the Fitch report noted that commercial mortgage defaults are accelerating, which has been evidenced by the quarterly reports of many banks.

On the bright side, regional banks could become more dominant in the United States as policymakers reassess risk in the financial system and enact more strict regulations, reports  Karey Wutkowski for Reuters. The notions of “too-big-to-fail” and “systemic risk” may change the country’s banking model to accommodate more mid-sized banks, says Denis Salamone, chief operating officer of Hudson City Bancorp.

For more information on regional banks, visit our regional banks category.

  • SPDR KBW Regional Bank ETF (NYSEArca: KRE): down 26% year-to-date

  • Regional Bank HOLDRs (NYSEArca: RKH): up 5.9% year-to-date

Max Chen 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.