Up over 100% year-to-date, the Direxion Daily Regional Banks Bull 3X Shares (DPST) is showing that gains don’t have to be realized at the large banking level in order to capitalize on the financial sector.
As for the fund, DPST seeks daily investment results equal to 300% of the daily performance of the S&P Regional Banks Select Industry Index. The fund invests at least 80% of its net assets (plus borrowing for investment purposes) in financial instruments and securities of the index, ETFs that track the index, and other financial instruments that provide daily leveraged exposure to the index or ETFs that track the index.
The index is a modified equal-weighted index that is designed to measure performance of the stocks comprising the S&P Total Market Index that are classified in the GICS regional banks sub-industry. Signs of life are starting to show in the fund’s YTD chart with the price recently moving above its 50-day moving average.
With the expectation that interest rates may creep higher heading into 2022, regional banks could benefit from increased revenue from their lending products. Smaller regional banks won’t require the overhead that larger banks need in order to keep the lights on.
Benefits of Regional Banking
Regional banking offers its own appeal over the Wells Fargos and Bank of Americas of the world. First Financial Bank suggested that the benefits of regional banking include easy access to ATMs and physical branches, as well as increased agility when it comes to adapting to new technology.
“Regional banks are bigger than community banks but smaller than national banks, with an asset range of $10 billion to $100 billion,” First Financial Bank said. “Some local banks are limited to one community, while a regional bank can operate branches across a few states and have history in each community. Their bankers may live in your neighborhood and shop at the same supermarket; they may even coach the local soccer team.”
“This ‘in-between’ status means regional banks provide many of the benefits of national and local banks in one package,” First Financial Bank added. “They offer a deep portfolio of national-bank services – from standard checking to advanced investment advice – while also developing and maintaining the personal relationships that make local banking attractive.”
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