Invesco KBW Bank ETF earns a Morningstar Medalist Rating of Negative with strength in areas such as People offset by weaker spots such as Process. The portfolio maintains a cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy receives a Low Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in liquidity exposure and yield exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And a high yield exposure is rooted in holding high dividend-paying or buyback stocks. The strategy’s management team earns an Above Average People Pillar rating. The strategy's parent organization earns the firm an Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

Wells Fargo

Goldman Sachs

JPMorgan Chase & Co

Morgan Stanley

Bank of America

PNC Financial Services

M&T Bank

Citigroup

State Street

Fifth Third Bancorp

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term. Invesco KBW Bank ETF earns a Low Process Pillar rating. The predominant detractor from the rating is the fund's mediocre long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the process has struggled over that period. The parent firm's five-year retention rate of 67% also holds the process back. The parent firm's five-year risk-adjusted success ratio of 39% further holds the process back. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. The parent's modest success ratio suggests that the firm could do better across its fund lineup.

The investment strategy as stated in the fund's prospectus is:  The investment seeks to track the investment results (before fees and expenses) of the KBW Nasdaq Bank Index (the "underlying index").  The fund generally will invest at least 90% of its total assets in the securities that comprise the underlying index. The underlying index is a modified-market capitalization-weighted index of companies primarily engaged in U.S. banking activities, as determined by the index provider. The underlying index is designed to track the performance of large national U.S. money centers, regional banks, and and thrift institutions that are publicly traded in the U.S. The fund is non-diversified. 

 The portfolio is overweight in financial services by 17.1 percentage points in terms of assets compared with the category average, and its consumer defensive allocation is similar to the category. The sectors with low exposure compared to category peers are technology and industrials, with technology underweighting the average portfolio by 5.9 percentage points of assets and industrials similar to the average. The portfolio is positioned across 24 holdings and is relatively top-heavy. Of the strategy's assets, 59.8% are concentrated within the top 10 holdings, as opposed to the typical peer's 49.0%.

Process

Invesco KBW Bank ETF benefits considerably from its team, earning it an Above Average People Pillar rating. There are four managers listed on the fund: Tony Seisser, Peter Hubbard, Pratik Doshi, Michael Jeanette. Experience on the team is abundant, with 11 years of average portfolio management experience. Together, they manage a total of 142 strategies, with a Bronze asset-weighted average Morningstar Medalist Rating, demonstrating their potential to deliver positive alpha relative to the category median in aggregate.  

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

Above Average

People

Invesco, with USD 1.3 trillion in AUM, tries to cover a great many bases. The firm succeeds in a number of areas but also has its share of subpar offerings, along with many others somewhere in the middle. The firm retains a Morningstar Parent rating of Average.
Invesco is now 3.5 years past the closing of its merger with OppenheimerFunds. While there were some glitches, overall the process avoided the pitfalls that can accompany such corporate actions. On the positive side, Invesco’s international-equity teams—its EQV team in Texas and the New York-based group inherited from Oppenheimer—remain strong points. The firm’s ETF lineup includes the popular Nasdaq-focused QQQ; passive strategies make up around 30% of Invesco’s AUM. 
However, the extensive U.S.-equity lineup remains a weak link despite manager shuffles aimed at bolstering poor performers. The retirement of Meggan Walsh, who managed the relatively few appealing offerings in that group, didn’t help. Fixed-income offerings run the gamut: The multisector and short-term-bond areas are good, but corporate high-yield is less impressive.
Invesco has a substantial presence outside the U.S., but fund performance has been subpar in Asia, with manager turnover an ongoing concern. In the U.K. and Europe, the picture has brightened, but that region still can’t be considered a strength.

Average

Parent

Invesco KBW Bank ETF

KBWB tracks a modified market-cap-weighted index of US banking firms.

Basel III Endgame is here, bringing more restrictive capital requirements for US banks. Further regulatory headwinds are in the pipeline as well, many of which will have similarly negative impacts on the sector's earnings power. The Invesco KBW Bank ETF may have de-rated, but the deteriorating fundamental backdrop justifies the market's pessimism.

KBWB: Basel Endgame Deals Another Blow To The Banks

The Invesco KBW Bank ETF (KBWB) was launched on 11/01/2011, and is a passively managed exchange traded fund designed to offer broad exposure to the Financials - Banking segment of the equity market.

Should You Invest in the Invesco KBW Bank ETF (KBWB)?

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Invesco's bank ETF has seen significant inflows as the sector rebounds on upbeat earnings reports. The Invesco KBW Bank ETF (KBWB) has seen $197 million in net flows over a one-week period, the third highest flows among Invesco's range of ETFs.

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Big hitters Morgan Stanley and Bank of America reported upbeat earnings for the second quarter, lifting bank ETFs. The Invesco KBW Bank ETF (KBWB) was up over 3% in midday trading Tuesday.

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The June payrolls rose by 209,000, below expectations, but the unemployment rate fell to 3.6%, which may worry the Fed due to higher than expected wage growth. The Consumer Price Index (CPI) is expected to rise by 0.3% before the Fed meeting in July, which could lead to a decline in U.S. inflation.

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The Financials sector, led by banks, is expected to report the highest year-over-year revenue growth of all 11 S&P 500 sectors. Two of the five industries in the sector are projected to report revenue growth above 10%: Consumer Finance (15%) and Banks (14%), according to FactSet. The Invesco KBW Bank ETF is recommended for purchase due to its low valuation, bullish seasonality, and potential positive Q2 results from major banks.

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News for Invesco KBW Bank ETF ETF (KBWB)