ETF Research and Analysis

by Robert Goldsborough
The narrowly focused SPDR S&P Regional Banking ETF KRE provides exposure to regional banks, whose performance generally is less correlated than that of national money-center banks. Unlike mega-banks, regional banks'   Read more 

Bull Case

Regional banks offer greater diversification benefits than their larger counterparts.
The fund's equal-weighting approach prevents a few banks from dominating the portfolio. It also makes KRE a purer play on regional banking than rivals such as iShares U.S. Regional Banks ETF IAT.
Most regional banks have less exposure to Europe than national banks.  Read more 

Bear Case

Most regional banks do not fall under the "too big to fail" umbrella and may not receive government support if they get into trouble.
KRE's holdings face an unfavorable regulatory environment that may materially alter their business models.
Morningstar's equity analysts hold the view that even with interest rates now rising, interest-spread revenue at banks won't grow quickly. The reason is that 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. Read more 

Morningstar Minute: Two disciplined takes on value investing 
Watch more 

Premium Membership

View all of our analyst reports with a free trial to Premium.