3 Financials ETFs To Benefit From New Bank Fees

Despite increased regulation on overdraft fess and the way lenders increase interest rates on later credit card payments, banks are experimenting with other ways to make up lost revenue.

Industry leaders state that many of the big banks are considering options from imposing maintenance fees on checking accounts to imposing charges on services like fraud alert, the use of a debit card and access to credit reports.  In fact, some banks have already started to hit consumers with these fees and take away banking perks.

In recent weeks, HSBC North America converted its free checking accounts to ones that carry a monthly maintenance fee and Wells Fargo (WFC) has openly announced the suspension of free checking as on July 1.  Bank of America (BAC) is following suite and exploring tiered checking account options which will encourage consumers to increase activity with the bank.   

Regional banks are following the same trend, illustrated by Fifth Third Bancorp’s (FITB) decision to drop free checking last fall and allow a customer to avoid monthly maintenance fees by enrolling in monthly direct deposit programs or an online bill payment program.   Additionally, TCF Financial (TCB), a bank that marketed itself on free checking, started charging its customers earlier this year.

At the end of the day, regardless of how hard regulators dictate changes to prevent banks from cashing in on abusive practices, banks will find a way to generate revenues. 

Some ETFs that could benefit from these new bank practices include:

  • Financial Select Sector SPDR (XLF), which boasts Bank of America and Wells Fargo in its top holdings.  XLF closed at $14.57 on Tuesday.
  • PowerShares Dynamic Banking Portfolio (PJB), which focuses on banking stocks and holds Fifth Third Bancorp, Wells Fargo and M&T Bank Corp (MTB) in its top holdings.  PJB closed at $12.67 on Tuesday.
  • KBW Regional Banking ETF (KRE), which focuses on regional banks and includes Webster Financial (WBS) and First Midwest Bancorp (FMBI) in its top holdings.  KRE closed at $24.46 on Tuesday.

When investing in these financial sector ETFs, it is important to keep in mind the inherent risks that they carry.  To help mitigate the effects of these risks the use of an exit strategy which identifies when an upward trend could come to an end is of importance.

According to the latest data at, these price points are: XLF at $14.16; PJB at $11.84; KRE at $23.66. These price points change on a daily basis and are reflective of market volatility and fluctuations.

Disclosure: No Positions

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