While valid, the frustration with low interest rates argument is somewhat flawed at the moment, if only from the perspective of the SPDR S&P Regional Banking ETF (NYSEArca: KRE) and the iShares U.S. Regional Banks ETF (NYSEArca: IAT).
Perhaps group of bank ETFs are waiting on higher rates than regional bank funds because higher interest rates lift net interest margins for the companies these ETFs own. Although big money left XLF and VFH last week, KRE and IAT added $70 million combined.
Regional bank ETFs trade at discounts to the S&P 500 with KRE sporting a price-to-earnings ratio of 15.2 and a price-to-book of 1.3, IAT has a 13.9 P/E and 1.3 P/B. The S&P 500 trades north of 17 times earnings with a P/B ratio over two.
Financial Select Sector SPDR
