Regional Banking ETF Gobbles Assets as Politics Grabs Attention

(Bloomberg) -- With Congress getting closer to passing a tax overhaul package and the Federal Reserve talking about easing regulation, a regional banking exchange-traded fund is getting a lot of love from investors.

The SPDR S&P Regional Banking ETF, ticker KRE, took in $290 million on Nov. 29, its largest daily inflow since 2008. That added to the almost $270 million the fund received the day before, as investors line up bets that regional banks will benefit from tax reform and deregulation. The ETF has gained about 7 percent this week.

With the Senate having sent the tax bill to the floor for debate, money managers are trying to position themselves should the legislation pass. Regional banks in particular will be winners, according to Walter Todd, chief investment officer at Greenwood Capital Associates.

“They're going to benefit 100 percent from a tax deal,” he said by phone. “Financials are for the most part, with the exception of a couple of larger names, pretty much a domestic only sector, particularly regional banks, which is one of the largest parts of financials today.”

Commentary this week from Fed chair nominee Jerome Powell and current Fed chief Janet Yellen on regulation could also be giving the community banks a boost, according to Brent Schutte, Milwaukee-based chief investment strategist of Northwestern Mutual Life Insurance Co.'s wealth-management unit.

“They both agreed that for banks that were smaller, the regulations needed to be rolled back or rightsized,” he said. “That's why you've seen a spike in the regional focused banks.”

To contact the reporter on this story: Sarah Ponczek in New York at sponczek2@bloomberg.net.

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Eric J. Weiner, Brendan Walsh

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