Bank stocks are rallying on Tuesday, lifting regional banking ETFs and broader U.S. markets.
Shares of regional banks including First Republic Bank (FRC) are leading the broad rally among U.S. stocks amid the Federal Reserve’s policy meeting. After falling to a new low on Monday, shares of First Republic jumped on Tuesday and are up over 51% in midday trading.
The rally follows a speech from Treasury Secretary Janet Yellen that said the government could backstop the deposits at more banks if there was a risk of contagion. The recent failure of Silicon Valley Bank and Signature Bank has put pressure on regional bank stocks, even as regulators guaranteed the deposits at those institutions after they were closed.
The volatility in regional banking ETFs has unveiled an opportunity for brave investors. The Invesco KBW Regional Banking ETF (KBWR) is up over 4% in midday trading on Tuesday and has climbed nearly 6% in the past week. The fund is still down over 13% year to date, making now an ideal time to buy in while prices are discounted.
First Republic is one of 52 holdings comprising KWBR, weighted at 0.53% as of March 20. Other holdings in the fund include Commerce Bancshares Inc (KBWR), Cullen/Frost Bankers Inc (CFR), Webster Financial Corporation (WBS), BOK Financial Corporation (BOKF), Prosperity Bancshares Inc (PB), New York Community Bancorp Inc (NYCB), SouthState Corporation (SSB), Home BancShares inc (HOMB), Community Bank System Inc (CBU), and Glacier Bankcorp Inc (GBCI).
Invesco’s regional banking ETF has $54 million in assets. Nearly 63% of KBWR by weight is in mid-cap stocks, while 37% of the fund by weight is in small-cap stocks.
KBWR is based on the KBW Nasdaq Regional Banking Index, which is a modified-market capitalization-weighted index that seeks to reflect the performance of U.S. regional banking and thrift companies. The index is compiled, maintained, and calculated by Keefe, Bruyette & Woods, and Nasdaq.
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