A strong management team and sound investment process underpin SPDR® S&P Regional Banking ETF's Morningstar Medalist Rating of Silver. The portfolio maintains a sizable cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The strategy’s management team earns an Above Average People Pillar rating. The strategy's effective investment approach earns an Above Average Process Pillar rating.  High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. The strategy's parent organization earns the firm an Above 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

Bank OZK

M&T Bank

Truist Financial

Citizens Financial Group

Huntington Bancshares

First Horizon National

Zions Bancorp

Regions Financial

Western Alliance Bancorporation

East West Bancorp

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. SPDR® S&P Regional Banking ETF earns an Above Average Process Pillar rating. The most important driver of the rating is that this fund tracks an index. Historical data, such as Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. The process is limited by the fund's weak long-term risk-adjusted performance. This can be seen in its 10-year alpha calculated relative to the category average, which suggests that the process has struggled over that period.

The investment strategy as stated in the fund's prospectus is:  The investment seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index derived from the regional banking segment of the U.S. banking industry.  In seeking to track the performance of the S&P Regional Banks Select Industry Index (the "index"), the fund employs a sampling strategy. It generally invests substantially all, but at least 80%, and of its total assets in the securities comprising the index. The index represents the regional banks segment of the S&P Total Market Index ("S&P TMI"). 

 The portfolio is overweight in financial services by 16.2 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 consumer cyclical, with technology underweighting the average portfolio by 5.7 percentage points of assets and consumer cyclical similar to the average. The strategy owns 142 securities and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 37.7% of the strategy's assets were concentrated in the top 10 fund holdings, as opposed to the category average's 46.6%. And finally, in terms of portfolio turnover, looking at year-over-year movements, 61% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Above Average

Process

SPDR® S&P Regional Banking ETF's strong team drives the strategy's Above Average People Pillar rating. There are two managers listed on the fund: Karl Schneider, Kala O’Donnell. Experience on the team is abundant, with 17 years of average portfolio management experience. Together, they manage a total of seven strategies, with a Silver asset-weighted average Morningstar Medalist Rating, indicating the 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.

People

State Street Global Advisors is under new leadership but continues to move along the positive trajectory established by former leaders. SSGA maintains its Above Average Parent Pillar rating.
Cyrus Taraporevala, who oversaw much of SSGA’s recent transformation, retired from the CEO position in December 2022 and passed the baton to his successor, Yie-Hsin Hung. She inherited a business that’s become more disciplined with its fund lineup. Fees have come down, while product development remains focused on fixed-income and sustainability funds, and many of SSGA’s launches have echoed that intention.
The seeds that SSGA planted over the past several years have been bearing fruit. It built out a low-cost series of portfolio building-block ETFs in the U.S. bearing the “SPDR Portfolio” branding. SSGA launched these later than its industry rivals, so they aren’t as large. But they’re competitive, with solid management and low fees, which helped them consistently take in new money over the past several years.
SSGA continued to overhaul its ETF business in Europe with most of its recent fixed-income and sustainability fund launches. Many of these funds track indexes and charge relatively low fees. With operations in the U.S. and Europe standing on a firm foundation, SSGA will put more focus on its Asia-Pacific business—the smallest regional segment of its business.

Parent

SPDR S&P Regional Banking ETF

KRE tracks an equal-weighted index of US regional banking stocks.

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Many smart and well-informed analysts seem to think that this is a great opportunity to buy the dip in regional bank stocks. While I think that the SPDR S&P Regional Banking ETF will eventually recover, I believe that the risks are disproportionately high.

KRE: Regional Banks - It's All About Risks And Price Action

Last Friday (March 10), seemingly out of the blue, the financial world was rocked with the failure of Silicon Valley Bank (SVB), then Signature Bank. This week we saw the contagion spread to Europe (Credit Suisse).

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The losses come even after 11 other banks pledged to deposit $30 billion in First Republic as a vote of confidence in the company.

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Investors were net purchasers of fund assets for the third week in a row, injecting a net $88.4 billion for the Refinitiv Lipper fund-flows week ended Wednesday, March 15. Equity ETFs experienced net outflows for the third week in four, handing back a little less than $11.9 billion for the most recent fund flows week - their largest weekly net outflows since December 21, 2022.

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For the first time in recent memory, what happens at the Fed next week is not as important as what's going on in certain areas in the market.

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This past weekend, banks saw their second and third largest collapse, respectively, as regulators closed Silicon Valley Bank (SVB Financial Group, ticker: SIVB) on Friday, March 10 and then closed Signature Bank (ticker: SBNY) on Sunday, March 12.

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U.S. bank stocks continued to draw attention of investors on Thursday as pundits downplayed recent bank failures and a bailout for banking giant Credit Suisse provided a lift.

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The collapse of Silicon Valley Bank last Friday has left investors scrambling to identify other regional banks that have similar balance sheet issues.

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The biggest bank failure since the financial crisis reverberated across the industry.

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Exchange-traded funds focused on bank stocks are bouncing as investors appear to be wading back into the beleaguered banking sector amid strong trading volume in the ETFs.

Bank ETFs bounce as this regional banking fund sees ‘record' trading volume over recent days

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Financial stocks were pacing the Dow Jones Industrial Average's DJIA premarket gainers, as tame inflation data helped distract investors from the banking sectors recent troubles. Shares of American Express Co. AXP climbed 3.8% ahead of the open, Goldman Sachs Group Inc. GS gained 3.2% and J.P.

Financial stocks' bounce, would add about 130 points to the Dow's price

Don't buy regional bank stocks yet - unless they slide at least another 20%-30% this week, DataTrek said in a note.

Bank stocks are now oversold but it's not time to buy the dip just yet, DataTrek says

SPDR S&P Regional Banking ETF is holding a diversified 143 regional bank stocks. KRE lost over a quarter of its market cap, caught by the Silicon Valley Bank failure.

KRE: Searching For Margin Of Safety

The SPDR S&P Regional Banking ETF (KRE) stock has been a toxic wasteland in the past few days. It has crashed by more than 22% in the past five days and is now sitting at the lowest level since November 2, 2020.

KRE ETF stock: Is it safe to buy the dip in regional banks now?

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The recent downward volatility of bank shares is largely an overreaction to isolated events. Bank insiders seem to agree as they are buying a lot of shares. The outlook for banks is generally good given rising rates. Dividends are safe in the foreseeable future, which gives a good base for valuation.

News for SPDR S&P Regional Banking ETF ETF (KRE)