SPDR® S&P Regional Banking ETF

The CBOE Volatility Index suddenly rose 6.0% on November 9, 2016, after it was clear that Trump had unexpectedly clinched the election.

In addition to the promising signs of the financial sector passing the rigor of this stress test, talk of deregulation makes the financial sector even more attractive.

A growing economy definitely benefits the banking sector. The impact will be positive for big banks and also for regional banks.

Equity markets trended lower after the Fed’s March meeting minutes were reported. In the minutes, some FOMC members sound concerned about the rise in equities.

The US dollar index was trading on a lower note on March 31, 2016, at 2:30 PM EST as unemployment added further uncertainty to the US rate hike.

Small-cap banks have been underperforming due to the yield curve that has been flattening since the start of 2014.

Competitors have outperformed Prosperity Bancshares based on forward PE and PBV. The ETFs have outperformed Prosperity Bancshares based on price movement, PE, and PBV.

Dividend stocks have underperformed this year so far. The dividend yield measures dividends payed by a company in the last 12 months relative to its share price.

Regions Financial’s (RF) Wealth Management revenue increased 10% YoY. Going forward, It intends to focus on growing its wealth management business.

Signs of financial stress in Global Systemically Important Banks (or GSIBs)—like Citigroup and JPMorgan (or JPM)—would impact the entire financial system. The signs of stress would impact stocks and bonds (BND). As a result, it’s important that the Fed and other regulators establish a suitable regulatory and supervisory framework.

When financial intermediaries allocate funds, they assess the risks and returns that come from various risky claims. Intermediaries help allocate resources and risks throughout the economy. Financial intermediation can result in concentrated risks. The risks increase the financial system’s fragile state. These risks are called systemic risks.

Currently, First Niagara Financial Group is trading at 1.5% above the 20-day moving average, 9.0% above the 50-day moving average, and 16.8% above the 200-day moving average.

The SPDR S&P Regional Banking ETF (KRE) targets US regional banks. It seeks to track the performance of the S&P Regional Banks Select Industry Index.

Investors are ready to pay a premium to own shares. Stock valuations are rich. They’re sensitive to rising interest rates. Don’t abandon them though—just be selective.

KRE seeks to track the performance of the S&P Regional Banks Select Industry Index,
particularly targets regional banks in the US. Shares of KRE have gained 11.4% YTD.

Apprehensions over climate change, an emphasis on global pension funds over the integration of ESG in their investments, and new markets will fuel demand for this type of bond.

The 2016 US presidential election is scheduled for November 8, 2016. This election will mark the 58th quadrennial US presidential election.

The 4Q15 GDP increased at an annual rate of 1.0% against a forecast of 0.4%. The banking sector took positive cues from the GDP report with major gains in banking stocks.

Inflation rates have also been at bay over the last few years. Currently, inflation rates are 1.7%. This is below the Fed’s long-term target of 2%.

The LCR defines the amount of highly-saleable short-term securities and central bank reserves that must be held by financial institutions (XLF) (KRE). It’s the ratio of the High-Quality Liquid Assets (or HQLA) divided by the projected net cash outflows over a specified period. HQLAs help the institution meet its short-term funding requirements.

Historically, a flatter yield curve had an adverse impact on the financial institutions’ returns. It lowered their net interest margins. The Fed continues to stress an accommodative monetary policy. The policy and strong overseas demand have kept yields low at the long end of the curve. As a result, the difference between 30-year and five-year Treasury yields fell to 154 basis points on September 5, 2014.

Russ explains the good news behind his upgrade of the global financial sector as well as the bad news keeping his sector outlook somewhat subdued.

The Federal Deposit Insurance Corporation (or FDIC) is the second most important banking regulator in the U.S. The FDIC directly examines and supervises more than 4,500 banks and savings banks for operational safety and soundness.

Fifth Third Bancorp has an impressive free cash flow position.

Revenue and earnings In this part, we’ll look at Welltower (HCN), a US healthcare REIT. Welltower’s revenue growth slowed from 15% in 2015 to 11% in 2016. The growth was driven by all of its segments, through rental income, resident fees and services, interest income, and other income. Its operating costs and other expenses (including interest expenses) […]

As per the latest JOLTS report, about 3.2 million Americans quit their jobs voluntarily last month. This is an increase of 0.1 million from the previous month.

With so many positive tailwinds for the financial sector, how can investors use ETFs to target this growth?

Despite and a rocky 3-month period, starting in late February/early March, the financial sector has really taken a positive outlook over the past ~month and some signs point to a continuation of this recent success.

For years, Puerto Rico has been using tax incentives to attract corporations to do business in its region. Over the last four decades, the agricultural economy has shifted toward the manufacturing and services sectors.

While the Dodd-Frank Act was passed to avoid another financial crisis, it has crippled banks’ profitabilities over the years due to higher capital requirements.

Barack Obama signed the Dodd-Frank Act into federal law in 2010.

Another factor that impacts small-cap stocks’ performance is the yield curve. The yield curve has remained on the flatter side since the recession.

The dismantling of Dodd-Frank regulations for banks should improve their profitabilities, which explains why their stocks have soared since Trump’s win.

The S&P 500 returns for a second-term president have been somewhat better than a first-term president, which is one reason for the incumbency factor.

Market participants struggle to reassess the macro outlook based on incoming data. The BlackRock Macro GPS tool exploits more sources of information.

The United States Census Bureau published the US retail sales report for June on July 15. Retail sales rose 0.6% in June on a month-over-month basis.

The US dollar index, which measures the strength of the US dollar against the major currencies, was on a bull run on July 11.

The non-manufacturing PMI is published by the ISM. It rose to the highest level since November 2015. The non-manufacturing PMI for May rose to 56.5.

Rate-sensitive XLF saw the largest outflows among GICS sector ETFs on a weekly basis. But it was also the biggest fund flow loser in the first half of 2016.

New factory orders in the US fell by 1.0% in May—compared to the forecast of a fall of 0.8%. The factory orders for April were revised down to a rise of 1.8%.

With Brexit out of the way, the focus will shift to domestic data releases. This week will see the release of US final GDP and US consumer confidence.

During last week’s volatile trading session, investors pulled money out of all but two US GICS Sector ETFs. All of the sectors closed in negative territory.

With assets under management of $1.7 billion, KRE is the largest and most heavily traded regional bank ETF in the United States.

Shares of KRE rose 2.1% last week. Year-to-date, shares of KRE have plunged 16%, dragged down by low oil prices and a slowing economy.

The ADP employment report often acts as a precursor to the Non-Farm Payrolls release by the Bureau of Labor Statistics, which is scheduled for March 4, 2016.

While I don’t have a crystal ball, here are three things I believe all investors need to know about returns in 2016.

Q. Tell us more about your outlook for electric vehicles.

Among the 214 13F filers holding the stock, 62 funds reduced their exposure to KRE, 49 sold all their holdings of the ETF, and 30 created new positions.

Credit growth has started to slow in the Us. From the 12% annualized growth rate of commercial and industrial credit in 2014, the rate is currently around 10.8%.

Within XLF, banking stocks have returned -5.3% YTD as of November 13, while regional banks have returned -1.6% YTD, outperforming the financial sector.

Banks have seen compliance costs rise since the Dodd-Frank Act regulations took effect. For small banks, it’s been harder to absorb these costs.

Financials tend to do well when interest rates rise. Rates usually rise when the economy is improving.

Based on PE and PBV, Popular’s competitors have outperformed. The ETFs that invest in Popular have also outperformed Popular based on price movement, PE, and PBV.

Year-to-date, Popular’s price movement is a mixture of ups and downs. After its 3Q15 earnings report, Popular stock fell 3.6% and closed at $30.26 per share on October 23, 2015.

The price-to-book value ratios of Synovus, BB&T, SunTrust Banks, Regions Financial, and Capital Bank Financial are 1.43x, 1.19x, 0.93x, 0.77x, and 1.37x.

The yield curve has steepened a bit compared to where it was a week or even a month ago. Investors should consider the yield curve slope an indicator of bank performance.

Banks benefit from a steeper yield curve, which allows banks to lend on higher long-term rates and borrow on lower short-term rates. This boosts banks’ margins.

During 1Q15, Regions Financial (RF) repurchased $102 million of common stock—completing its $350 million 2014 repurchase program.

KeyCorp is a large regional bank with about $94 billion in assets. It competes with JP Morgan (JPM) and Bank of America (BAC) in various service segments.

KeyCorp (KEY) is represented in key ETFs focused on the banking sector. The SPDR S&P Bank ETF (KBE) has KeyCorp comprising ~1.7% of its portfolio.

STI’s deposit growth is clearly lagging behind the industry average. Other banks are experiencing strong growth in this area.

BB&T’s loan and deposit growth is marginally below the industry average. Its ROE and price-to-book ratio are close to the peer average.

Deposits are the cheapest funding source. Since deposits fund a major chunk of BB&T’s assets, the overall funding costs are low.

SunTrust provides a broad range of consumer and wholesale banking, mortgage banking, and private wealth management services.

SunTrust Bank’s return on equity is 8%, which is 18% lower than the industry average.

SunTrust Bank’s net interest income in 2014 remained stable compared to 2013 as strong loan growth offset the decline in net interest margin.

Since 2010, the loan portfolio of SunTrust Bank (STI) has had a compound annual growth rate (or CAGR) of 3.5%. Commercial loans have had a CAGR of 8.2%.

SunTrust’s Mortgage Banking segment reported a net loss of $56 million for 2014 compared to a net loss of $527 million for 2013.

The Wholesale Banking segment’s net interest income increased in 2014 compared to 2013.

SunTrust Bank (STI) paid common dividends totaling $371 million or $0.70 per share in 2014.

This article focuses on SunTrust’s Consumer Banking and Private Wealth Management segment.

Dividend yield is a company’s annual dividend per share. It’s expressed as a percentage of its share price. Dividend yields are important if you want a regular stream of income.

BB&T is focused on expanding its corporate banking services. It’s adding new industry verticals for lending and investment banking services.

BB&T Corporation (BBT) is a financial holding company. It conducts its operations primarily through its bank subsidiary—Branch Bank.

Earnings are growing, but at a slow pace. Regions Financial’s (RF) net income increased by 1% in 2014—compared to 2013.

A substantial portion of Regions Financial’s growth has been through the acquisition of other financial institutions. The bank was formed in 1971.

Regions Financial’s loan portfolio can broadly be classified into business and consumer loans. Business loans account for ~62% of the total loan portfolio.