With bank stocks surging, some exchange traded funds tracking the financial services sector are growing in a big way. That includes the PowerShares KBW Bank Portfolio (NASDAQ: KBWB).
KBWB tracks the widely followed KBW Nasdaq Bank Index. That index “is a modified-market capitalization-weighted index that seeks to reflect the performance of companies that do business as banks or thrifts that are publicly-traded in the US. The Index is compiled, maintained and calculated by Keefe, Bruyette & Woods, Inc. and is composed of approximately 24 companies representing leading national money centers and regional banks or thrifts,” according to PowerShares, the fourth-largest U.S. ETF sponsor.
KBWB recently joined the $1 billion in assets under management club, according to a statement from PowerShares. As of Dec. 5, KBWB had $1.06 billion in assets under management. The ETF celebrated its sixth anniversary last month.
Deregulation could also help the financial sector improve their margins. President Donald Trump’s administration has shown its eagerness in cutting back the red tape and remove some of the post-financial crisis regulations that has stifled the industry.
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The recently completed Federal Reserve stress tests were passed with flying colors by KBWB constituents. Improving earnings and sturdier balance sheets coupled with the stress test results are expected to give big banks the ability to further boost shareholder rewards, including buybacks and dividends.
“Since June, the financial sector significantly outperformed the broader market, resulting in an increased interest in investible financial services products with an estimated $8.1 billion in inflows from June 6 through December 1. Over this period, the S&P 500 Financials gained 17.9% while the S&P 500 Index rose 8.8%. The largest banks drove much of the financials’ performance, with KBWB advancing 17.6%,” according to PowerShares.
Bank of America Corp. (NYSE: BAC), Dow component JPMorgan Chase & Co. (NYSE: JPM) and Citigroup Inc. (NYSE: C) combine for nearly a quarter of KBWB’s lineup. Wells Fargo (NYSE: WFC) and US Bancorp (NYSE: USB) combine for over 15% of the ETF.
Including KBWB, there are 11 ETFs tracking the financial services sector with at least $1 billion in assets under management.
For more information on the banking sector, visit our financial category.