JP Morgan Chase and Bank of America are currently the two largest holdings in the ETF with a combined 30.4% weight.
Lyxor has unveiled a new ETF providing exposure to US large-cap banking stocks and diversified financials.
Launched on London Stock Exchange and Borsa Italiana, the Lyxor S&P 500 Banks UCITS ETF takes its constituents from the bellwether S&P 500 index of blue-chip US stocks.
It becomes the second ETF in Europe to specifically target the US banking sector, following BlackRock’s iShares S&P US Banks UCITS ETF (BNKS LN), which debuted in May.
The new Lyxor fund hits the market a full 15 basis points cheaper than the BlackRock fund, making it a compelling option for investors seeking exposure to the US banking space.
The Lyxor fund comes with a total expense ratio (TER) of 0.20% compared to 0.35% for the BlackRock product.
The fund tracks the S&P 500 Capped 35/20 Banks and Diversified Financials Select Index, which selects companies from the parent S&P 500 operating in the regional banks, diversified banks, investment banking & brokerage, consumer finance, and asset management & custody banks sub-sectors.
Constituents are weighted by market capitalization, with no single stock allowed to represent more than 33% of the index at rebalance and all remaining stocks capped at 19%. (Not 35% and 20% as the index name might suggest).
This differs from that of the iShares ETF, which tracks the S&P 900 Banks (Industry) 7/4 Capped Index, drawing its 49 constituents from the broader S&P 900 Index, with constituents capped at 7%. This means the Lyxor fund has more of a concentrated (36 holdings), large-cap and less-cyclical feel, focused on the top tier of US banks and financials.
Commenting on the launch, Adam Laird, Head of ETF Strategy, Northern Europe, at Lyxor ETF, said: “There’s a lot of opportunity in American banks. Rising rates give the potential for higher margins – and the sector could get a shot in the arm by the US administration’s planned deregulation campaign.
“We launched this ETF to specialise on banks and investment – excluding some of the less cyclical financial stocks held in other funds. This will be a good complement to our existing range of bank focused ETFs.”
In a pitch to investors, Chanchal Samadder, Head of Equity ETF, at Lyxor, added: “We think now is a great time to be investing in banks following the recent stress tests in the US. All the banks passed with flying colours and, with their very strong capital positions, we feel that banks right now are poised to return capital to shareholders, through buybacks, dividends, and also investment capex.
“Also, bank valuations are really cheap relative to themselves through history and to other sectors…we feel it is a really attractive time to invest in banks right now.”
The ETF trades in US dollars on LSE (BNKU LN) and in euros on Borsa Italiana (BNKU IM). Income is accumulated within the fund.
Lyxor also offers ETFs tracking the banking sectors of the eurozone and Europe through the Lyxor Euro Stoxx Banks UCITS ETF (BNKE FP) and Lyxor Stoxx Europe 600 Banks UCITS ETF (BNK FP) respectively. These funds have €850m and €650m in AUM respectively and trade in euros. They come with TERs of 0.30%.