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Further Reading from MarketBeat
Bank Earnings Are Mixed—These 2 ETFs Offer Very Different Paths to a RecoveryAuthor: Nathan Reiff. Originally Published: 10/17/2026. 
Key Points
- Third-quarter bank earnings are giving investors a closer look at the financial sector's strengths and weaknesses.
- Banking ETFs offer a way to invest in the industry without choosing individual bank stocks.
- The SPDR S&P Bank ETF and iShares U.S. Regional Banks ETF offer different ways to capitalize on banking trends.
- Special Report: Uranium Mine Flood That Sparked a 2006 Price Surge Returns
Bank earnings season is here, with major U.S. financial institutions like JPMorgan Chase (NYSE: JPM) and Goldman Sachs (NYSE: GS) delivering mixed results for Q3 2026. JPMorgan posted an unusual miss on adjusted earnings per share (EPS), even as net revenue rose more than 8% year over year (YOY). Goldman, on the other hand, easily beat analyst estimates on both the top and bottom lines, thanks to healthy equities trading activity. With earnings updates from other major and smaller regional banks still to come, investors have an opportunity to take different approaches to investing in the broader banking industry through exchange-traded funds such as the State Street SPDR S&P Bank ETF (NYSEARCA: KBE) and the iShares U.S. Regional Banks ETF (NYSEARCA: IAT). If investors anticipate further divergence in Q3 results among bank stocks, these funds may help mitigate risk while still providing broad exposure to the sector. Still, the funds are very different from one another and may perform better under different conditions. KBE vs. IAT: How Their Holdings and Weightings Compare
KBE tends to offer broader exposure across the banking industry, tracking an index of bank stocks of various sizes and structures. Notably, it uses a modified equal-weight approach that gives smaller banks a much greater influence than they would have in a market-cap-weighted portfolio. By contrast, IAT is a U.S. regional bank fund weighted by market capitalization. As a result, larger regional institutions have the greatest impact on the fund's performance. Both funds offer more than just exposure to the largest financial institutions available to investors, but they have different risk profiles. KBE, for instance, has about 109 holdings, more than triple the number in IAT's basket. This provides greater diversification across bank sizes and business types, while KBE's equal-weight allocation approach helps limit overconcentration. IAT, on the other hand, is a fairly narrow play on a smaller set of specific types of banks, with two in particular—U.S. Bancorp (NYSE: USB) and PNC Financial Services Group (NYSE: PNC)—dominating the fund, with each accounting for about 15% of the total portfolio allocation. Which Market Conditions Could Favor KBE or IAT?KBE's broader exposure to bank stocks and sub-industries may make it a winner if the sector experiences an uneven recovery. If interest rates fall, KBE could benefit as conditions begin to support additional lending and a broader soft landing. IAT could outperform KBE if some of its specific holdings rally or if a regional-bank recovery affects multiple positions. For example, if funding costs stabilize and concerns about commercial real estate fade, investors may gain confidence in regional lenders, which could boost IAT. The fund could also benefit from falling interest rates if deposit costs decline faster than asset yields. Both funds are likely to perform well during a period of broad economic expansion, but they are more vulnerable in the event of a recession or banking crisis. In the latter scenario, however, KBE may be better positioned if weakness is concentrated among regional banks. As earnings season continues, investors should pay attention to both deposit trends and credit quality. Delinquency rates, net charge-offs, loan-loss provisions and other metrics can provide a fuller picture of whether a bank is facing increased pressure from borrowers. Deteriorating credit quality could weigh on both ETFs. Valuations are also an important consideration. If one group of banks appears to be pricing in a stronger recovery, for example, the related fund may face greater downside risk if earnings disappoint. KBE's equal-weight approach means it may be less susceptible to being swayed by individual stocks—but that can be a disadvantage if shares trend upward, just as it can help minimize declines in the opposite scenario. Both funds have similar expense ratios: 0.35% for KBE and 0.37% for IAT. KBE is the larger and more heavily traded of the two funds, although neither is likely to present significant liquidity concerns for most traders. At the same time, the ETFs have not distinguished themselves from one another in terms of performance this year—both are up only 1% to 2% year to date (YTD). For investors interested in the banking sector, the decision may come down to the funds' weightings and their different sub-industry focuses. . |
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