SPDR KBW Bank (ETF) (KBE) — I reviewed the impact an interest rate increase should have on banking ETFs like SPDR KBW Regional Banking (ETF) (KRE) and iShares Dow Jones US Reg Banks Ind.(ETF) (IAT) on Nov. 19 and Dec. 3, respectively.
The Federal Reserve is widely expected to announce a rate hike today at 2 p.m., following the conclusion of its FOMC policymaking meeting. Like KRE and IAT, KBE, which has a mixture of money-center and regional banks, should benefit from the first interest rate increase since 2006.
The top 10 holdings in KBE are Bank Of The Ozarks Inc (OZRK), Western Alliance Bancorporation (WAL), Fulton Financial Corp (FULT), Valley National Bancorp (VLY), First Niagara Financial Group Inc. (FNFG), Washington Federal Inc. (WAFD), Signature Bank (SBNY), Firstmerit Corp (FMER), PrivateBancorp Inc (PVTB) and Texas Capital Bancshares Inc (TCBI).
S&P Capital IQ ranks KBE “overweight.” The fund has a yield of 1.56% and a relatively low expense ratio of 0.35%.
Technically KBE is in an intermediate bull channel, having regained the channel Tuesday following a breakdown late last week. The daily high almost matched the 200-day moving average at $34.81.
A strong long-term buy signal in the form of a golden cross was triggered on Dec. 3, confirming a long-term bull market is in place. If the Fed raises rates today, buying KBE at $35 and selling it above $38 would result in a quick gain of at least 8.5%. The ETF could also be considered as a longer-term investment.
