Morningstar Rating

ETF Research and Analysis

by Robert Goldsborough
SPDR S&P Regional Banking ETF KRE holds a basket of regional banks, whose performance generally is less correlated than that of national money-center banks. Unlike the mega-banks, regional banks' performance is more   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 US 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.
The fund's holdings face an unfavorable regulatory environment that may materially alter their business models.
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. Read more 

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