Should You Invest in the Invesco KBW Bank ETF (KBWB)?
Designed to provide broad exposure to the Financials - Banking segment of the equity market, the Invesco KBW Bank ETF (KBWB) is a passively managed exchange traded fund launched on 11/01/2011.
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
Sector ETFs are also funds of convenience, offering many 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 13, placing it in bottom 19%.
Index Details
The fund is sponsored by Invesco. It has amassed assets over $2.28 billion, making it one of the largest ETFs attempting to match the performance of the Financials - Banking segment of the equity market. KBWB seeks to match the performance of the KBW Nasdaq Bank index before fees and expenses.
The KBW Nasdaq Bank index is a modified-market capitalization-weighted index that seeks to reflect the performance of companies that do business as banks or thrifts that are publicly-traded in the US.
Costs
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are 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 2.94%.
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, Jpmorgan Chase & Co (JPM) accounts for about 8.41% of total assets, followed by Citigroup Inc (C) and Pnc Financial Services Group Inc/the (PNC).
The top 10 holdings account for about 60.70% of total assets under management.
Performance and Risk
Year-to-date, the Invesco KBW Bank ETF has gained about 3.62% so far, and is down about -11.22% over the last 12 months (as of 03/09/2023). KBWB has traded between $48.57 and $67.81 in this past 52-week period.
The ETF has a beta of 1.23 and standard deviation of 39.66% for the trailing three-year period, making it a high risk choice in the space. With about 25 holdings, it has more concentrated exposure than peers.
Alternatives
Invesco KBW 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, KBWB 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 SPDR S&P Bank ETF (KBE) tracks S&P Banks Select Industry Index. First Trust NASDAQ Bank ETF has $210.84 million in assets, SPDR S&P Bank ETF has $1.56 billion. FTXO has an expense ratio of 0.60% and KBE 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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Invesco KBW Bank ETF (KBWB): ETF Research Reports
JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report
Citigroup Inc. (C) : Free Stock Analysis Report
The PNC Financial Services Group, Inc (PNC) : Free Stock Analysis Report
SPDR S&P Bank ETF (KBE): ETF Research Reports
First Trust NASDAQ Bank ETF (FTXO): ETF Research Reports
