Although Zions Bancorp (NasdaqGS: ZION), a constituent in many regional bank ETFs, was the one failure in the Fed’s stress tests of the 30 largest U.S. banks, regional banks are seen as benefiting from higher interest rates because those higher rates could lift net interest margins for holdings of KRE, KBE and rival ETFs.
KBE and the iShares U.S. Regional Banks ETF (NYSEArca: IAT) are up an average of 6.3% in the past month. Several of IAT’s top-10 holdings have either announced or expected to announce substantial dividend increases. On a percentage basis, the average dividend hike from SunTrust (NYSE: STI), Regions Financial (NYSE: RF) and Keycorp (NYSE: KEY) is over 61%. Those three banks combine for about 12.4% of IAT’s weight. [Even WIth Citi, Bank ETF Dividend News is Pretty Good]
Financial Select Sector SPDR