Don't Abandon Bank ETFs Just Yet

The PowerShares KBW Bank Portfolio (NASDAQ: KBWB) is one of the many bank exchange traded funds that is scuffling this year, but investors should not be hasty in departing this sector. Not with some credible catalysts still at play.

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.

Some good news for KBWB and friends is that the financial services sector is widely regarded as perhaps the only sector in the U.S. that is attractively valued relative to the broader market and its own long-term averages.

The financial sector valuations still look relatively cheap, compared to the broader market. The sector’s valuations are still about 25% below the average since the early 1990s.