Performance of XLF
In this part of our series on bank investments in the face of a probable federal funds rate hike in December, we’ll take a closer look at the performance of US banking sector during the year so far, as of November 13, 2015. We should note first that, despite robust fundamentals, banks have been volatile in 2015.
The Financial Select Sector SPDR ETF (XLF) mainly holds large-cap US financial stocks in its portfolio. The fund invests in an array of financial service firms ranging from investment banks, commercial banking, mortgage finance, REITs (real estate investment trusts), consumer finance, and insurance. The fund also invests heavily in banks, which form 47.91% of its portfolio. As of November 13, the Financial Select Sector SPDR ETF has returned -3.3% YTD (year-to-date), while the iShares US Dow Jones US Financial Services ETF (IYG)(IYF) has returned -1.8% YTD.
Performance of KRE versus the financial sector
In comparison, the SPDR S&P Regional Banks ETF (KRE) and the iShares US Regional Banks ETF (IAT) have gained 8.0% and 0.9%, respectively, as of November 13. Within XLF, banking stocks have returned -5.3%, while regional banks have returned -1.6% YTD.
Clearly, regional banks have outperformed the overall financial sector in 2015. The top-performing regional bank was PNC Financial Services (PNC), which has gained by 1.2% YTD, whereas the worst-performing regional bank was Keycorp (KEY), which has fallen by 8.2% during the year so far.
The top-performing large bank was JP Morgan Chase (JPM), which returned 4.9% YTD. By contrast, shares of Morgan Stanley have underperformed the sector and were down by 12.6% YTD as of November 13.
Continue to the next part of this series for a discussion of analyst recommendations and expectations for both large and regional banks.