ETF

Three reasons why banks may be compelling now

Transcript: Transcript

The financial sector has been one of the leading contributors to S&P 500 returns this year. Within it, banks may be a compelling opportunity.  Bank CEOs highlighted three recurring themes in their first quarter earnings reports.

One, bank earnings have generally been strong in 2025, with the four largest US banks reporting a combined earnings increase of 10.8% in the first quarter.1 This growth was fueled by stronger-than-expected net interest income and solid revenue performance in both stock and fixed income markets.

Two, AI remains a major area of investment, with many CEOs emphasizing its role in enhancing efficiency, fostering innovation, and improving customer engagement. Chatbots and virtual assistants are elevating the customer experience, while automation of routine tasks is reducing costs and boosting operational efficiency. AI is also strengthening risk management by improving the detection and prevention of fraudulent activities and enhancing security.

Three, optimism in the banking sector has also been buoyed by regulatory developments. Recent deregulation gives banks greater flexibility to innovate and expand. These changes enabled banks to streamline operations, lower compliance costs, and reallocate resources toward technology and strategic initiatives. A more favorable regulatory environment is also encouraging mergers and acquisitions, helping banks strengthen their market positions and broaden service offerings. Deregulation is also opening new markets and supporting portfolio diversification, further driving growth and profitability. This shift is seen as a catalyst for increased competition and innovation, ultimately benefiting consumers through improved products and services.

For exposure to the banking theme, consider KBWB, Invesco KBW Bank ETF. Learn more about it and get other related ETF insights below this video.

 

Important information 

1 Source: Trepp, “Bank Earnings Review – Q1 2025: Earnings Beat Expectations Driven by Interest Income & Trading, on the Eve of Liberation Day,” April 22, 2025.

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The financial sector has been one of the leading contributors to S&P 500 returns this year. Within it, banks may be a compelling opportunity.  Bank CEOs highlighted three recurring themes in their first quarter earnings reports.

1. Generally strong earnings

One, bank earnings have generally been strong in 2025, with the four largest US banks reporting a combined earnings increase of 10.8% in the first quarter.1 This growth was fueled by stronger-than-expected net interest income and solid revenue performance in both stock and fixed income markets.

2. Investment in AI

Two, AI remains a major area of investment, with many CEOs emphasizing its role in enhancing efficiency, fostering innovation, and improving customer engagement. Chatbots and virtual assistants are elevating the customer experience, while automation of routine tasks is reducing costs and boosting operational efficiency. AI is also strengthening risk management by improving the detection and prevention of fraudulent activities and enhancing security.

3. Deregulation

Three, optimism in the banking sector has also been buoyed by regulatory developments. Recent deregulation gives banks greater flexibility to innovate and expand. These changes enabled banks to streamline operations, lower compliance costs, and reallocate resources toward technology and strategic initiatives. A more favorable regulatory environment is also encouraging mergers and acquisitions, helping banks strengthen their market positions and broaden service offerings. Deregulation is also opening new markets and supporting portfolio diversification, further driving growth and profitability. This shift is seen as a catalyst for increased competition and innovation, ultimately benefiting consumers through improved products and services.

KBWB, Invesco KBW Bank ETF

For exposure to the banking theme, consider KBWB, Invesco KBW Bank ETF. Learn more about it and get other related ETF insights below.

KBWB
Invesco KBW Bank ETF

Inception date : 11/01/2011

Transcript

Additional ETF resources 

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    Source: Trepp, “Bank Earnings Review – Q1 2025: Earnings Beat Expectations Driven by Interest Income & Trading, on the Eve of Liberation Day,” April 22, 2025.