Guggenheim likes “asset sensitive” regionals, including Comerica (NYSE: CMA), KeyCorp (NYSE: KEY), Fifth Third Bancorp (NasdaqGS: FITB), Citizens Financial (NYSE: CFG) and Sterling Bancorp (NYSE: STL). KeyCorp and Fifth Third combine for 2.7% of KRE’s weight.
However, some of those banks have exposure to energy loans. For example, 8% of Zions’ (NasdaqGS: ZION) loan portfolio goes to the energy sector. For Regions, it is 3.5%. Zions is 1.35% of KRE’s weight.
Still, an improving U.S. economy could foster increased borrowing and financing by businesses, large and small, across the U.S. while benign mortgage rates could also provide a lift to the mortgage lending operations of regional banks. ETFs such as KRE benefit as rates rise because investors believe higher interest rates will lead to increased net interest margins for regional banks. [Rising Rates Plays Rise Again]
SPDR S&P Regional Banking ETF
