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Bank ETFs Climb on Buffett’s Berkshire Bet on Financials

This article was originally published on ETFTrends.com.

Bank stocks and sector-related exchange traded funds were leading the markets higher after recent filings revealed Warren Buffett's Berkshire Hathaway Inc. jumped in on the falling bank stocks to increase his bets on financials, hinting at the possibility of further merger and acquisition activity in the space.

Among the top performing non-leveraged ETFs on Friday, the Invesco KBW Bank ETF (KBWB) increased 2.3%, First Trust NASDAQ ABA Community Bank Index Fund (QABA) advanced 2.0% and SPDR S&P Bank ETF (KBE) gained 2.1%. Meanwhile, the broader Financial Select Sector SPDR (XLF) was 1.8% higher.

Financial stocks were picked up momentum after Buffett's Berkshire Hathaway most recent regulatory filings for the fourth quarter revealed it has increased its stakes in several of the top U.S. banks, including Bank of America (BAC), U.S. Bancorp (USB), J.P. Morgan Chase (JPM), PNC Financial Services (PNC), The Bank of New York Mellon (BK) and The Travelers Companies Inc. (TRV).

Vice Chairman Charles Munger said Berkshire eventually dived into this segment when the timing aligned, Bloomberg reports.

“As investment has gotten harder and the banks have done better and better, we’ve finally reached a crossing point where he was willing to act,” Munger said.

Buffett, a well-known value investor, has typically bought when companies run out of favor, but his move this time around may be a play on the potential loosening regulations on M&A activity in the financial space after a prolonged dry spell.

“Berkshire also boosted its stakes in regional lenders, including PNC Financial Services Group Inc. and U.S. Bancorp. That could be a bet on consolidation in the industry, as this month’s announced merger between SunTrust Banks Inc. and BB&T Corp. has led to speculation that more deals are coming,” according to a note.

The number of deals blocked by regulators are on the decline across the U.S., the E.U., Brazil, South Africa, Australia and Turkey, with only seven deals blocked last year, compared to 68% from the year before, the Wall Street Journal reports.

“After a bumper year of enforcement in 2017, it appears that the landscape may now be beginning to stabilize,” more in line with levels in 2015 and 2016, Allen & Overy lawyers Antonio Bavasso and Louise Tolley wrote in a report.

For more information on the financial sector, visit our financial category.