Morningstar Rating

ETF Research and Analysis

by Robert Goldsborough
Suitability
Investors seeking focused exposure to banks, brokerages, and asset managers could consider iShares U.S. Financial Services IYG as a tactical satellite holding. This exchange-traded fund, which excludes insurance firms   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

Rates haven't risen fast enough yet to give a boost to banks, and our analysts don't believe that interest-spread revenue at banks will grow anytime soon.
High unemployment could constrain consumers' willingness to borrow and their ability to repay their loans, potentially leading to large loan write-downs.
If interest rates rise, that could hamper underwriting activity at investment banks.  Read more 

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