Though at smaller weights, SIVB and Signature are the top two holdings in the SPDR S&P Regional Banking ETF (NYSEArca: KRE). Like KBWR, KRE features seven of KBW’s top 20 ideas among its holdings. As an equal weight ETF, KRE is not highly exposed to any of its 81 holdings, but the names recommended by KBW do combine for nearly 11% of the ETF’s weight. [Stress Tests and Bank ETFs]
As has been noted regarding ETFs such as KRE and KBWB in the past, these funds make for ideal plays in rising interest rate environments. KBW confirms as much.
“In general, we do believe that higher rates is better for the bank group and will translate into higher NIMs and profits — and that the very high capital levels well cushion the risk of reduced bond values at the lion’s share of the banks,” said the research firm.
PowerShares KBW Regional Banking Portfolio
Tom Lydon’s clients own shares of IWM and KRE.