3 Best Regional Bank ETFs To Invest In
Written by
James Holbach
Edited by
T. Woods
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Regional banks made headline news recently, when three smaller banks failed over the course of just five days in early 2023. Silicon Valley Bank was by far the most prominent, but Signature Bank and Silvergate Bank also fell victim. Many were afraid there would be another full-blown banking crisis, but regulators and central banks all over the world acted to head that off.
What is a Regional Bank?
It’s not just an arbitrary name, nor is it based on geographical presence, at least not anymore. It’s actually a function of size — the Federal Reserve defines a regional bank as one with $10 billion to $100 billion in assets. Historically, such smaller served a defined region of the country, hence the name, but today that is often not the case, but the name stuck anyway.
The Best Regional Bank ETFs
The banking sector in general has suffered recently, although there are many experts calling for a comeback soon. However, as the 2023 mini-crisis showed, smaller banks can be risky. For that reason, exchange-traded funds (ETFs) can be a great option for investors that want exposure to regional banking. ETFs invest in a number of different holdings based on their particular strategy, reducing overall risk through diversification.
1. iShares US Regional Bank ETF (IAT)
Expense ratio: 0.40%.
One-year return: 26.5%.
IAT seeks to replicate an index that selects from the small and midsize bank stocks of the Dow Jones Bank Index. It currently holds 35 different stocks, with top holdings US Bancorp, PNC Financial Services Group and Truist Financial Corp making up 39% of the portfolio.
2. SPDR S&P Regional Banking ETF (KRE)
Expense ratio: 0.35%.
One-year return: 23.5%.
KRE tracks the S&P Regional Banks Select Industry Index, investing no less than 80% of its total assets in stocks from the index. It currently holds 141 stocks, with top holdings Bank OZK, M+T Bank Corp and Truist Financial Corp making up about 8% of the portfolio.
3. Invesco KBW Regional Banking ETF (KBWR)
Expense ratio: 0.35%.
One-year return: 14.3%.
KBWR tracks the KBW Nasdaq Regional Banking Index, normally investing at least 90% of its total assets in the securities that comprise the Index. It holds 51 stocks, with top holdings Commerce Bancshares, Cullen/Frost Bankers and Webster Financial Corp making up about 12% of the portfolio.
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