Is The Financial ETF A Buy, Now That Citigroup, BofA, and JPMorgan Have Reported? (NYSE:XLF), (NYSE:C), (NYSE:JPM), (NYSE:BAC)

“Financial ETFs sold off on Friday after Bank of America (NYSE:BAC) reported a decline in revenues across businesses, suggesting that loan demand is yet to rise and that the recovery was further away. Uncertainty surrounding the impact of financial regulation on the large banks also weighed on the stocks. In addition, fresh data showed consumer sentiment took another step back in July, suggesting, once again, that economic recovery could be delayed,” Shanthi Venkataraman Reports From The Street.

While the outlook for banks might seem bearish, Anthony Mirhaydari from Investor Place looks at it in a different way.

“Although mega banks JPMorgan (NYSE:JPM), Citigroup (NYSE:C), and Bank of America (NYSE:BAC) have all reported better than expected earnings results — only to be knocked to the ground by unimpressed investors. The problem, is that the earnings beats are being driven by reduction in loan loss provisions, which are like accounting piggybanks that are used to protect against defaults. An optimist would say that these reductions are a result of a strengthening economy and improvements in the number of people who can pay their loans on time. You can see this in the way that loan charge-offs are declining: Quarter-over-quarter, they fell $1.2 billion at Bank of America, $422 million at Citigroup (NYSE:C), and $2.2 billion at JPMorgan (NYSE:JPM),” Anthony Mirhaydari Reports From Investor Place.

Mirhaydari goes on to say, “But the skeptics are having none of it. Bank stocks have tumbled over the last two days on concerns bank executives are using creative tactics to dress up their earnings — prematurely tapping into their credit reserves. There are also concerns over a decline in revenues: The top line dropped 7.6% year-over-year at JPMorgan (NYSE:JPM), 33.3% at Citigroup (NYSE:C), and 11% at Bank of America. And of course, there are worries over the hit to profitability related to the passage of financial regulatory reform legislation in Washington. As a result, bank stocks have failed at triple top resistance that has contained the Financial Select Sector SPDR ETF (NYSE:XLF) since May. And this underperformance by the financials is what’s dragging down the broad market.” 

“I think there is some reason for optimism. The decline in loan losses is an unmitigated positive. And the decline in revenue might be due to some shrewd prepositioning by executives to protect themselves against an increase in interest rates. Analysts at FBR Capital note that JPMorgan (NYSE:JPM) shortened the average maturity of its securities portfolio. Translation: The bank is selling long-term Treasury bonds and buying more short-term Treasury bills instead. That cuts the losses the bank will take on its portfolio should the economy continue to improve and the Fed starts raising rates. This is exactly the right step to take and will help boost profitability into the future. This is because the value of long-term bonds drop more severely than short-term bonds as rates rise. Once the (NYSE:XLF) moves through $15, I’m a buyer,” Mirhaydari Reports.

We have put together some more details on the Financial Select Sector SPDR ETF (NYSE:XLF) including a list of the banks within the ETF below:

Financial Select Sector SPDR ETF (NYSE:XLF) Visit Our (XLF) Category: HERE

The investment includes companies from the following industries: banks, diversified financials, insurance and real estate. The fund will normally invest at least 95% of its total assets in common stocks that comprise the relevant Select Sector Index. This fund has adopted a policy that requires it to provide shareholders with at least 60 days notice prior to any significant material change in its policy or its underlying index. It is nondiversified.   

  Name Symbol Index Weight
1 JPMorgan Chase & Co. (JPM) 9.80%
2 Bank of America Corp. (BAC) 9.57%
3 Wells Fargo & Co. (WFC) 8.86%
4 Berkshire Hathaway’B’ (BRK.B) 8.04%
5 Citigroup Inc. (C) 5.91%
6 Goldman Sachs Group Inc. (GS) 4.39%
7 American Express Co. (AXP) 3.23%
8 U.S. BANCORP (USB) 2.85%
9 MORGAN STANLEY (MS) 2.18%
10 MetLife Inc. (MET) 2.04%
11 PNC Financial Services Group Inc. (PNC) 2.01%
12 Bank of New York Mellon Corp. (BK) 1.98%
13 Prudential Financial Inc. (PRU) 1.61%
14 Travelers Cos. Inc. (TRV) 1.54%
15 Simon Property Group Inc. (SPG) 1.52%
16 AFLAC Inc. (AFL) 1.40%
17 Capital One Financial Corp. (COF) 1.25%
18 BB&T Corp. (BBT) 1.20%
19 State Street Corp. (STT) 1.17%
20 CME Group Inc. Cl A (CME) 1.11%
21 Chubb Corp. (CB) 1.04%
22 Allstate Corp. (ALL) 0.96%
23 Charles Schwab Corp. (SCHW) 0.87%
24 Franklin Resources Inc. (BEN) 0.85%
25 Progressive Corp. (PGR) 0.81%
26 SunTrust Banks Inc. (STI) 0.80%
27 PUBLIC STORAGE (PSA) 0.79%
28 EQUITY RESIDENTIAL (EQR) 0.78%
29 T. Rowe Price Group Inc. (TROW) 0.78%
30 Loews Corp. (L) 0.77%
31 Marsh & McLennan Cos. (MMC) 0.77%
32 Vornado Realty Trust (VNO) 0.74%
33 Northern Trust Corp. (NTRS) 0.74%
34 FIFTH THIRD BANCORP (FITB) 0.66%
35 Boston Properties Inc. (BXP) 0.65%
36 Hartford Financial Services Group Inc. (HIG) 0.65%
37 Ameriprise Financial Inc. (AMP) 0.62%
38 HCP Inc. (HCP) 0.61%
39 AON Corp. (AON) 0.61%
40 Host Hotels & Resorts Inc. (HST) 0.59%
41 INVESCO Ltd. (IVZ) 0.55%
42 Regions Financial Corp. (RF) 0.54%
43 Avalonbay Communities Inc. (AVB) 0.51%
44 Discover Financial Services (DFS) 0.51%
45 Principal Financial Group Inc. (PFG) 0.50%
46 IntercontinentalExchange Inc. (ICE) 0.49%
47 Lincoln National Corp. (LNC) 0.47%
48 Ventas Inc. (VTR) 0.47%
49 UNUM GROUP (UNM) 0.46%
50 M&T Bank Corp. (MTB) 0.46%
51 KEYCORP (KEY) 0.45%
52 NYSE EURONEXT (NYX) 0.45%
53 Genworth Financial Inc. Cl A (GNW) 0.44%
54 Comerica Inc. (CMA) 0.43%
55 Hudson City Bancorp Inc. (HCBK) 0.37%
56 XL Group PLC (XL) 0.37%
57 Plum Creek Timber Co. Inc. REIT (PCL) 0.37%
58 Kimco Realty Corp. (KIM) 0.35%
59 SLM CORP. (SLM) 0.34%
60 Health Care REIT Inc. (HCN) 0.33%
61 People’s United Financial Inc. (PBCT) 0.32%
62 American International Group Inc. (AIG) 0.31%
63 Legg Mason Inc. (LM) 0.30%
64 PROLOGIS (PLD) 0.30%
65 Cincinnati Financial Corp. (CINF) 0.27%
66 Moody’s Corp. (MCO) 0.27%
67 Marshall & Ilsley Corp. (MI) 0.27%
68 Huntington Bancshares Inc. (HBAN) 0.27%
69 Torchmark Corp. (TMK) 0.26%
70 Assurant Inc. (AIZ) 0.25%
71 Leucadia National Corp. (LUK) 0.24%
72 Zions Bancorp (ZION) 0.24%
73 CB Richard Ellis Group Inc. Cl A (CBG) 0.23%
74 First Horizon National Corp. (FHN) 0.17%
75 NASDAQ OMX Group Inc. (NDAQ) 0.16%
76 E*TRADE Financial Corp. (ETFC) 0.15%
77 Apartment Investment & Management Co. (AIV) 0.15%
78 Federated Investors Inc. (FII) 0.11%
79 Janus Capital Group Inc. (JNS) 0.11%

 

Chart forFinancial Select Sector SPDR (XLF)

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