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Should You Invest in the iShares U.S. Regional Banks ETF (IAT)?

Zacks Equity Research
·4 min read

The iShares U.S. Regional Banks ETF (IAT) was launched on 05/01/2006, and is a passively managed exchange traded fund designed to offer broad exposure to the Financials - Regional Banks segment of the equity market.

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

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 - Regional Banks is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 3, placing it in top 19%.

Index Details

The fund is sponsored by Blackrock. It has amassed assets over $849.88 million, making it one of the average sized ETFs attempting to match the performance of the Financials - Regional Banks segment of the equity market. IAT seeks to match the performance of the Dow Jones U.S. Select Regional Banks Index before fees and expenses.

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The Dow Jones U.S. Select Regional Banks Index is a free-float adjusted market capitalization-weighted index which measures the performance of the regional bank sub-sector of the U.S. equity market.

Costs

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.39%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 2.53%.

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, Pnc Financial Services Group Inc (PNC) accounts for about 12.47% of total assets, followed by Truist Financial Corp (TFC) and Us Bancorp (USB).

The top 10 holdings account for about 65.38% of total assets under management.

Performance and Risk

The ETF has lost about -16.42% so far this year and is down about -8.08% in the last one year (as of 08/31/2022). In that past 52-week period, it has traded between $47.91 and $69.28.

The ETF has a beta of 1.19 and standard deviation of 40.57% for the trailing three-year period, making it a high risk choice in the space. With about 42 holdings, it has more concentrated exposure than peers.

Alternatives

IShares U.S. Regional Banks ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, IAT is an outstanding option for investors seeking exposure to the Financials ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

Invesco KBW Regional Banking ETF (KBWR) tracks KBW Nasdaq Regional Banking Index and the SPDR S&P Regional Banking ETF (KRE) tracks S&P Regional Banks Select Industry Index. Invesco KBW Regional Banking ETF has $75.57 million in assets, SPDR S&P Regional Banking ETF has $3.36 billion. KBWR has an expense ratio of 0.35% and KRE 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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iShares U.S. Regional Banks ETF (IAT): ETF Research Reports
 
The PNC Financial Services Group, Inc (PNC) : Free Stock Analysis Report
 
U.S. Bancorp (USB) : Free Stock Analysis Report
 
SPDR S&P Regional Banking ETF (KRE): ETF Research Reports
 
Invesco KBW Regional Banking ETF (KBWR): ETF Research Reports
 
Truist Financial Corporation (TFC) : Free Stock Analysis Report
 
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Zacks Investment Research