Morningstar Rating

ETF Research and Analysis

by Robert Goldsborough
IShares U.S. Financial Services IYG is a passively managed exchange-traded fund that provides focused exposure to banks, brokerages, and asset managers. This ETF, which excludes insurance firms and REITs from its benchmark,  Read more 

Bull Case

Despite net interest-margin pressure in the short term, over the longer term, higher interest rates should help U.S. banks.
Banks also are in general better-capitalized than in the past, and capital ratios have been improving.
Banks are well-positioned for the future, having done a fine job cutting expenses. Read more 

Bear Case

Morningstar's equity analysts hold the view that interest-spread revenue at banks won't grow until interest rates rise, but even when rates do rise, net interest margins are expected to rise more slowly than rates themselves, as higher-yielding assets will be added as lower-yielding ones fall off.
IYG is expensive relative to other financial-services ETFs.
If interest rates rise, that could hamper underwriting activity at investment banks. Read more 

This Strategic Beta ETF Ticks a Lot of Boxes 
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