Despite the technological innovation seen in the U.S. and around the world, the banking system remains one of the most essential lubricants of the economic engine. Banks don't just take deposits, though that is one of the industry's important functions. These institutions extend the credit needed for companies to expand and for people to buy houses. Financial institutions support the vibrant functioning of capital markets, and banks backstop vital consumer needs, such as auto loans and credit cards. Where ...

On Feb. 4, 2026, Valley Wealth Managers, Inc. disclosed selling 134,355 shares of the Invesco KBW Bank ETF (NASDAQ:KBWB), an estimated $10.6 million trade based on quarterly average pricing. What happened According to a SEC filing dated Feb. 4, 2026, Valley Wealth Managers, Inc. sold 134,355 shares of Invesco KBW Bank ETF during the fourth quarter. The estimated transaction value was $10.6 million. The fund’s quarter-end KBWB position was valued at $14.1 million, down $9.5 million from the prior quarter, ...

Core Viewpoint - Mivtachim The Workers Social Insurance Fund has fully exited its position in the Invesco KBW Bank ETF (NASDAQ:KBWB), selling 127,000 shares valued at approximately $9.93 million, indicating a strategic rebalancing rather than a negative outlook on the banking sector [1][2][10]. Fund Activity - The fund's sale of 127,000 shares during the fourth quarter resulted in a complete removal of its exposure to the Invesco KBW Bank ETF, which previously represented 1.4% of the fund's reportable assets under management (AUM) [2][3]. - The transaction reflects a shift in strategy, as the fund reallocates capital towards broader market exposure rather than maintaining a single-sector focus [10]. ETF Performance - As of January 28, shares of the Invesco KBW Bank ETF were priced at $85.09, reflecting a 20% increase over the past year, outperforming the S&P 500 by approximately 6 percentage points [3]. - The ETF achieved a total return of 32% over the past year, driven by factors such as margin stabilization and resilient credit quality [9]. ETF Overview - The Invesco KBW Bank ETF has an AUM of $5.96 billion and a dividend yield of 2%, with a focus on large and regional U.S. banks [4][5]. - The ETF aims to track the performance of the KBW Nasdaq Bank Index, investing at least 90% of its assets in large U.S. money center banks, regional banks, and thrift institutions [8]. Market Context - The sale of KBWB shares appears to be a rebalancing decision, as banks have been viewed as a modest expression of cyclical recovery, and the fund's strategy aligns with a preference for diversified index ETFs [10]. - Sector ETFs can provide rapid gains when market narratives shift, and monitoring capital movements post-performance can offer insights into investor sentiment [11].

Industry Overview - The banking sector has experienced a strong performance in 2025, with the Invesco KBW Bank ETF (KBWB) increasing by 31.6% and the SPDR S&P Regional Banking ETF (KRE) showing a year-to-date gain of 10.9% [1] Company Performance - Citigroup Inc (NYSE:C) has emerged as one of the top-performing bank stocks, boasting a year-to-date increase of 70.4%, attributed to successful restructuring efforts initiated in late 2023. The stock has reached a 17-year high of $120.27, with only two negative trading sessions since November 21 [2] - Fifth Third Bancorp (NASDAQ:FITB) has also shown significant gains, rising 10.8% since the beginning of December and achieving a year-to-date increase of 13.9%. The stock is currently priced at $48.17, close to its two-year high of $49.07 reached on November 25, 2024. The upcoming acquisition of Comerica (CMA) is expected to close in the first quarter of 2026, positioning Fifth Third as the ninth largest bank in the country [4]

Core Insights - America's largest banks are projected to end 2025 with historic stock prices, strong balance sheets, and regulatory freedom, attracting attention from investors in banking ETFs [1] Group 1: Bank Performance - JPMorgan Chase stock is showing an upward trend, with bank stocks outperforming other market stocks [2] - The KBW Bank Index (BKX) has increased by 30% year-to-date, surpassing the S&P 500 Index, with JPMorgan, Bank of America, and Wells Fargo reaching record levels, while Citigroup exceeded its book value for the first time in seven years [3] - Analysts expect large banks to continue outperforming in the coming year, with more upside than previously anticipated [4] Group 2: ETF Performance - Bank ETFs, such as the State Street Financial Select Sector SPDR ETF, Invesco KBW Bank ETF, and State Street SPDR S&P Bank ETF, have rallied between 14% and 30% this year due to strong performance from large lenders [5] Group 3: Earnings and Capital Markets - Performance is increasingly driven by earnings growth and deal-making momentum rather than interest-rate bets [6] - Global investment banking volumes are expected to increase by 10% year-over-year, the highest since 2021 [7] - Despite earlier fluctuations and IPO postponements, trading revenues for major banks are forecasted to reach record levels in 2025, with net income also expected to hit a record high [8] Group 4: Deregulation and Capital Deployment - Deregulation is changing the investment landscape for bank ETFs, with American banks projected to deploy $180 billion to $200 billion in excess capital by year-end due to policies from the Trump administration [10] - This capital is expected to be allocated towards stock repurchases, technology investments, and mergers, benefiting bank-focused ETF portfolios [10] Group 5: Profitability Targets - Major banks are setting ambitious profitability targets, with Bank of America aiming for a return on tangible common equity (ROTCE) of 16% to 18%, and Wells Fargo targeting 17% to 18% [11] - JPMorgan plans to invest an additional $10 billion in 2026 to enhance credit cards, branches, employee compensation, and AI initiatives [12] Group 6: Implications for ETF Investors - Bank ETFs are evolving from being interest-rate-sensitive investments to being linked to capital markets, mergers, acquisitions, and business growth [13] - Analysts suggest that with deregulation and expansion plans, financial ETFs may be entering a new cycle focused on capital allocation rather than mere survival [13]

Core Insights - Interest rates are declining, U.S.-China trade tensions are increasing, and recent earnings reports from major U.S. banks indicate a positive economic signal despite concerns over non-bank lenders [1] Banking Sector Performance - JPMorgan Chase CEO Jamie Dimon highlighted credit concerns in the U.S. economy, leading to declines in regional banking shares [2] - Zions Bancorporation and Western Alliance Bancorporation reported significant losses, causing their shares to drop 13% and nearly 10% respectively [3] - The Vanguard Financials Index Fund ETF (VFH) and SPDR S&P Bank ETF (KBE) have seen losses of 4.5% and 9% over the past month, contrasting with a slight increase of 0.1% in the SPDR S&P 500 ETF Trust (SPY) [3] Financial Sector Earnings - Consumer spending and household finances remain stable, with credit demand improving and delinquencies declining [5] - Third-quarter results from 47.7% of the Finance sector in the S&P 500 show total earnings growth of over 20.4% year-over-year, with 96.2% of companies beating EPS estimates [5][6] Sector Rankings and Valuation - The Finance sector ranks fifth among 16 sectors classified by Zacks, with the Financial - Investment Bank category positioned strongly [7] - The financials sector has a forward price-to-earnings multiple of 10.97X, significantly lower than the S&P 500's 19.88X [8] Growth Projections - Projected EPS growth for the financials sector is 8.41%, compared to 6.88% for the S&P 500, with the Financial - Investment Bank industry's growth at 14.45% [9] - The financials sector has a lower debt-to-equity ratio of 0.34X compared to the S&P 500's 0.58X, and the Financial - Investment Bank industry's ratio is even lower at 0.15X [9] Interest Rate Environment - The Federal Reserve is cutting interest rates, which may lead to a steepening yield curve, benefiting the banking sector by boosting net interest margins [10][11] - Healthy credit demand is essential to support gains in net interest margins [11] Investment Opportunities - Financials exchange-traded funds (ETFs) such as iShares U.S. Financial Services ETF (IYG), iShares US Financials ETF (IYF), and others are expected to perform well in the current environment [12]

Core Viewpoint - The Federal Reserve has maintained its benchmark effective federal funds rate (EFFR) in the range of 4.25% to 4.50%, citing elevated uncertainty about the economic outlook, which has led to a sell-off in the financial sector despite the anticipated nature of the announcement [1] Financial Sector Performance - The financials sector has increased by over 9% in 2025, outperforming the S&P 500, with only communication services, utilities, technology, and industrials showing higher gains [2] - Bank stocks have shown strong performance, with notable gains from major banks such as JPMorgan Chase & Co. (24.85%) and Goldman Sachs Group (27.09%) [8] Future Expectations - There is an 82-83% probability of a rate cut in the upcoming September FOMC meeting, a significant increase from 38% prior to the July jobs report [5] - The likelihood of a rate cut by the October FOMC meeting stands at approximately 85% [5] - A potential rate cut could stimulate borrowing and refinancing, positively impacting the financial sector [7] Invesco KBW Bank ETF Insights - The Invesco KBW Bank ETF (KBWB) has outperformed both the S&P 500 and the broader financials sector, with institutional inflows significantly exceeding outflows over the past year [12] - KBWB has a low expense ratio of 0.35% and a dividend yield of 2.15%, making it an attractive option for investors anticipating a Fed rate cut [14] - The ETF's holdings are heavily weighted towards major banks, which account for nearly 48% of its portfolio [10] Market Sentiment - Institutional ownership of KBWB has increased, with a ratio of 149 institutional buyers to 74 sellers, indicating strong market confidence [12] - Short interest in KBWB has decreased, suggesting a positive sentiment among investors [13]

Core Insights - Despite elevated interest rates and ongoing trade tensions, the largest U.S. banks continue to report strong financial results [1] - In Q2, the five largest U.S. banks saw a 17% increase in trading revenues and a 7% rise in investment banking revenues compared to the same quarter last year [2] Trading Performance - Volatility in the markets has become a business driver for banks' equities trading desks, with profits dependent on trade volume rather than market direction [3] - Banks have benefited from increased trading activity due to dramatic stock price swings, facilitating trades and collecting fees [4] Diversification and Resilience - The performance of financial services firms highlights the importance of diversification, allowing banks to thrive regardless of high interest rates or economic challenges [5] - Corporate clients remain active in pursuing mergers, issuing debt, and going public despite trade uncertainties, indicating a robust deal-making environment [6] Earnings Highlights - Morgan Stanley reported Q2 2025 earnings per share of $2.13, exceeding estimates and up from $1.82 a year ago, with net revenues of $16.79 billion, a 12% increase [7][8] - Goldman Sachs achieved Q2 EPS of $10.91, surpassing estimates and rising from $8.62 a year ago, with Global Banking and Markets revenues up 24% to $10.1 billion [9] - JPMorgan's quarterly earnings were $4.96 per share, beating estimates and up from $4.4 a year ago, with revenues of $44.91 billion exceeding expectations [10] - Wells Fargo reported adjusted EPS of $1.54, surpassing estimates and up from $1.33 in the prior year, while Citigroup's adjusted net income per share was $1.96, a 28.9% increase year-over-year [11] Investment Opportunities - Financials-based exchange-traded funds (ETFs) are expected to gain traction in light of the strong performance of banks, including iShares U.S. Financial Services ETF and Financial Select Sector SPDR [12]