ETF Research and Analysis
by John GabrielSuitability
SPDR KBW Bank KBE offers exposure to a relatively concentrated portfolio of 24 national money center banks and super-regional banks. Because of the fund's narrow focus, investors should treat this ETF as a tactical satellite holding. Read more
SPDR KBW Bank KBE offers exposure to a relatively concentrated portfolio of 24 national money center banks and super-regional banks. Because of the fund's narrow focus, investors should treat this ETF as a tactical satellite holding. Read more
Bull Case
Following a peak in loan-loss provisions, earnings should grow fairly rapidly as provisions recede against a backdrop of stabilizing loan demand and improving net interest margins.
Banks could benefit down the road from their ability to charge higher spreads on any additional risks they take on. This could translate into improved profitability and higher returns on equity down the road when the credit markets stabilize.
As marginal players are forced out, many larger banks could benefit from increased market shares. Read more
Bear Case
The special credit facilities put in place by the Federal Reserve (post-Lehman's collapse) are scheduled to be wound down in early 2010. This adds some uncertainty for the banks, as it remains to be seen how the financial system will react to such a massive withdrawal of liquidity.
While aid from the government should help the major banking institutions survive as going concerns, it can (and often does) mean that equityholders get severely diluted. The reality is that equityholders are at the very bottom of the capital structure.
Companies in the financials sector are subject to extensive government regulation, which may adversely affect the scope of their activities, the prices they can charge, and the amount of capital they must maintain. Read more
The Best ETF Sector Idea for 2010
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