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Should You Invest in the SPDR S&P Bank ETF (KBE)?

The SPDR S&P Bank ETF (KBE) was launched on 11/08/2005, and is a passively managed exchange traded fund designed to offer broad exposure to the Financials - Banking segment of the equity market.

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Financials - Banking is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 2, placing it in top 13%.

Index Details

The fund is sponsored by State Street Global Advisors. It has amassed assets over $3.51 billion, making it one of the larger ETFs attempting to match the performance of the Financials - Banking segment of the equity market. KBE seeks to match the performance of the S&P Banks Select Industry Index before fees and expenses.

The S&P Banks Select Industry Index is a modified equal-weighted index that seeks to reflect the performance of publicly traded companies that do business as banks or thrifts. The Bank Index is currently comprised of common stocks of national money centers and leading regional banks or thrifts listed on the NYSE or another U.S. national securities exchange, or NASDAQ/National Market System.

Costs

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 0.35%, making it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 2.02%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Financials sector--about 100% of the portfolio.

Looking at individual holdings, Silvergate Capital Corp. Class A (SI) accounts for about 1.48% of total assets, followed by Pnc Financial Services Group Inc. (PNC) and Bank Of New York Mellon Corporation (BK).

The top 10 holdings account for about 13.47% of total assets under management.

Performance and Risk

Year-to-date, the SPDR S&P Bank ETF return is roughly 35.62% so far, and is up about 72.76% over the last 12 months (as of 11/01/2021). KBE has traded between $33.08 and $57.07 in this past 52-week period.

The ETF has a beta of 1.38 and standard deviation of 38.67% for the trailing three-year period, making it a high risk choice in the space. With about 97 holdings, it effectively diversifies company-specific risk.

Alternatives

SPDR S&P Bank ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, KBE is a good option for those seeking exposure to the Financials ETFs area of the market. Investors might also want to consider some other ETF options in the space.

First Trust NASDAQ Bank ETF (FTXO) tracks Nasdaq US Smart Banks Index and the Invesco KBW Bank ETF (KBWB) tracks KBW Nasdaq Bank index. First Trust NASDAQ Bank ETF has $289.51 million in assets, Invesco KBW Bank ETF has $3.55 billion. FTXO has an expense ratio of 0.60% and KBWB charges 0.35%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.


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SPDR S&P Bank ETF (KBE): ETF Research Reports
 
The PNC Financial Services Group, Inc (PNC): Free Stock Analysis Report
 
The Bank of New York Mellon Corporation (BK): Free Stock Analysis Report
 
Silvergate Capital Corporation (SI): Free Stock Analysis Report
 
Invesco KBW Bank ETF (KBWB): ETF Research Reports
 
First Trust NASDAQ Bank ETF (FTXO): ETF Research Reports
 
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