Morningstar Rating

ETF Research and Analysis

by Robert Goldsborough
Suitability
SPDR S&P Bank ETF KBE provides exposure to the banking sector. This narrowly focused exchange-traded fund tracks a benchmark index that excludes nonbank financial institutions, such as REITs, insurance companies, and   Read more 

Bull Case

KBE's equally weighted portfolio provides meaningful diversification benefits and gives the fund a slight contrarian bent.
The fund offers an attractive way to position for a steepening yield curve.
Despite net-interest-margin pressure in the short term, over the longer term, higher interest rates should help U.S. banks. 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 then, 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.
The fund's holdings face an unfavorable regulatory environment that may materially alter their business models.
If interest rates rise, that could hamper underwriting activity at investment banks. Read more 

2 Low-Cost ETFs for Broad U.S. Stock Exposure 
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