The top five holdings of this small bank ETF are Commerce Bancshares Inc (CBSH, 4.02% of assets); TFS Financial Corp (TFSL, 2.63%); First Financial Bankshares Inc (FFIN, 2.54%); BOK Financial Corp (BOKF, 2.32%); and South State Corp (SSB, 2.19%). The fund has an annual current dividend yield of 3.52%, paid quarterly.
First Trust NASDAQ ABA Community Bank Index Fund (QABA)
From Weiss Ratings
We’ve all have been affected by the coronavirus pandemic. The major disruptions to our social lives naturally mean that our spending habits have drastically changed.
Bank of America Corp. (BAC, Rated “C”) knows a thing or two about credit card spending patterns, and according to a recent study, Americans are spending a lot more money on things like pets, education, and their homes. For example, spending on pets is up 23% over the last year to an average of $200 per month.
On the opposite end, Americans are cutting back in a big way on things like travel and entertainment, which are down 21% and 22%, respectively.
Millions of Americans are out of work and struggling, but for the fortunate ones that are still working, we’re simply shuffling our budget from one area to another. Instead of buying airplane tickets and hotel rooms, we are remodeling and furnishing our homes. Instead of eating at restaurants, we are cooking at home and funneling the savings into investments.
Americans are spending less and saving more. 53% of Americans are saving more money than usual and 51% say they will continue to save more regardless of what happens with coronavirus.
As an investor, you should be asking yourself where all those savings dollars are going: Big national banks like Bank of America Corp. and JPMorgan Chase & Co. (JMP, Rated “C”)? Or smaller regional banks? What about credit unions?
The answer is probably all three, and there are a handful of ETFs that will help you profit from the savings wave.
Megabanks have a sizable cost advantage over smaller banks. The average community bank has less than $5 million in assets per employee, while big banks can have $20 million in assets per employee. But bigger isn’t always better. That size can work against big banks because the rise in savings will only have a modest impact compared to how it can affect the profits of smaller regional or local banks.
The best banking ETF for exposure to smaller banks is the First Trust NASDAQ ABA Community Bank Index Fund (Rated “D”). Its portfolio of community banks trades for an average of 11 times earnings, 94% of book value and pays a 3%+ dividend.
Tony Sagami, Weiss Ratings, 1-877-934-7778, weissratings.com, October 17, 2020