With expectations for a Federal Reserve rate hike cooling in light of the weak first quarter economic data, smaller regional bank-related exchange traded funds are outperforming Wall Street banks.

The SPDR S&P Regional Banking ETF (NYSEArca: KRE), the largest regional bank ETF, increased 3.0% year-to-date. KRE has the largest tilt toward smaller banks, including 18.5% micro-caps, 53.8% small-caps and 24.0% mid-caps.

Additionally, the SPDR S&P Bank ETF (NYSEArca: KBE), which leans toward slightly larger companies, gained 3.4% so far this. KBE includes 47.6% small-caps, 36.5%, mid-caps, 8.0% large-caps and 8.0% mega-caps.

As we move higher up the capitalization chain, we see that larger banks have slowed down. For instance, while the iShares U.S. Regional Banks ETF (NYSEArca: IAT) shares a similar moniker, the IAT includes 19.2% small-caps, 36.4% mid-caps, 24.9% large-caps and 19.5% mega-caps, and the fund only rose 2.0% year-to-date. [Similar Names, but These Bank ETFs Aren’t Twins]

Lastly, the Financial Select Sector SPDR (NYSEArca: XLF), which tracks the large-cap financial names from the S&P 500 Index, is only up 0.1% year-to-date.

According to SNL Financial, banks and thrift stocks with a market-cap above $50 billion dipped 1.8% over the first four months of the year, whereas banks and thrifts with a market-cap between $5 billion and $10 billion gained 7.2%, reports Nicole Bullock for the Financial Times.

“In the small bank world, there is much more rapid loan growth and they have more flexibility with capital,” Fred Cannon, director of research at KBW, said in the FT article. “They are paying more dividends, buying back more shares and doing M&A.”

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