Regional Banks or Megabanks? These ETFs Make Very Different Bets on the Sector
Key Points
State Street SPDR S&P Bank ETF offers a significantly lower expense ratio and a higher trailing-12-month dividend yield than First Trust Nasdaq Bank ETF.
First Trust Nasdaq Bank ETF is more concentrated in its top holdings and focuses on large-cap banks, while State Street SPDR S&P Bank ETF provides more diversified exposure across 101 holdings.
While First Trust Nasdaq Bank ETF showed higher returns over the last 12 months, State Street SPDR S&P Bank ETF delivered slightly higher growth for a $1,000 investment over the past five years.
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Investors choosing between State Street SPDR S&P Bank ETF (NYSEMKT:KBE) and First Trust Nasdaq Bank ETF (NASDAQ:FTXO) could weigh the State Street fund's lower costs and broader diversification against the First Trust fund's recent momentum and concentrated focus on megacap financial institutions.
Both ETFs provide targeted exposure to the U.S. banking sector, but they take fundamentally different paths to reach that goal. The State Street fund casts a wider net across the industry, whereas the First Trust fund uses a smart-beta approach to select and weight its portfolio based on specific fundamental metrics.
Snapshot (cost & size)
| Metric | FTXO | KBE |
|---|---|---|
| Issuer | First Trust | SPDR |
| Expense ratio | 0.60% | 0.35% |
| 1-yr return (as of May 20, 2026) | 28.7% | 25.0% |
| Dividend yield | 1.80% | 2.30% |
| Beta | 0.92 | 0.91 |
| AUM | $286.5 million | $1.3 billion |
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
The State Street fund is notably more affordable with a 0.35% expense ratio, saving investors $2.50 annually for every $1,000 invested compared to the First Trust fund. Additionally, KBE offers a higher payout with a 2.30% yield.
Performance & risk comparison
| Metric | FTXO | KBE |
|---|---|---|
| Max drawdown (5 yr) | (46.60%) | (45.20%) |
| Growth of $1,000 over 5 years (total return) | $1,311 | $1,327 |
What's inside
State Street SPDR S&P Bank ETF (NYSEMKT:KBE) offers exposure to 101 holdings, reflecting a modified equal-weighted strategy across sub-industries like asset management and regional banking. Its largest positions include Apollo Global Management (NYSE:APO) at 1.17%, Voya Financial (NYSE:VOYA) at 1.16%, and Cathay General Bancorp (NASDAQ:CATY) at 1.12%. Launched in 2005, the fund has a trailing-12-month dividend of $1.48 per share. It seeks to track an index that reduces concentration in the industry's biggest players, with 100% of its assets in financial services.
In contrast, First Trust Nasdaq Bank ETF (NASDAQ:FTXO) is much tighter, holding only 42 stocks. Its top holdings include Citigroup (NYSE:C) at 8.75%, Bank of America (NYSE:BAC) at 7.94%, and JPMorgan Chase & Co. (NYSE:JPM) at 7.76%. Launched in 2016, this fund has a trailing-12-month dividend of $0.68 per share. While both funds focus 100% on financial services, the First Trust fund uses the Nasdaq US Smart Banks Index to weight its holdings based on factors like volatility, liquidity, and value.
For more guidance on ETF investing, check out the full guide at this link.
What this means for investors
Bank stocks have had a rough few years, rattled by regional bank failures in 2023 before recovering as higher interest rates boosted lending profits. If you’re intrigued by investing in that recovery, KBE and FTXO are two ETFs worth your consideration. Here’s the key differences:
KBE weights all its holdings equally, meaning smaller regional banks get just as much representation as megabanks like JPMorgan or Bank of America. You’re getting broad exposure to the entire banking landscape, not just the institutions that dominate the news. FTXO uses a factor screen that concentrates in the largest U.S. banks, betting that institutions like Citigroup, Wells Fargo, and JPMorgan are best positioned to benefit from deregulation and a pickup in deal activity.
The expense ratio (what you’re paying to own these ETFs) really sets them apart. FTXO charges nearly twice what KBE does, a gap that adds up to roughly $25 more per year on a $10,000 investment and will compound over time. For that premium to make sense, FTXO's megabank tilt needs to consistently outperform. For long-term investors who prefer broad diversification at a lower cost, KBE is the safer, more practical choice.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Bank of America is an advertising partner of Motley Fool Money. Citigroup is an advertising partner of Motley Fool Money. Sara Appino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.
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