KBWB Outperforms IAT Since 2021 Despite Lower Yield

Invesco KBW Bank ETF (KBWB) has delivered a total return of 43% since 2021, significantly outpacing the iShares U.S. Regional Banks ETF (IAT), which returned 6% over the same period. While both funds focus on the financial sector, they differ in their specific holdings and income characteristics, presenting distinct profiles for investors weighing performance against dividend yield.

KBWB provides diversified exposure to national and regional banks, whereas IAT targets the regional banking sector exclusively. The Invesco fund holds 26 positions, with its largest allocations to JPMorgan Chase & Co at 8.10%, Wells Fargo & Co at 8.08%, and Morgan Stanley at 7.74%. Launched in 2011, KBWB generated a compound annual growth rate of 7.4% since 2021. In contrast, IAT holds 30 positions specifically in the regional bank sub-sector. Its top holdings include U.S. Bancorp at 15.01%, PNC Financial Services Group at 14.77%, and Truist Financial at 9.51%. Launched in 2006, IAT produced a compound annual growth rate of 1.3% during the same timeframe.

Both funds have underperformed the S&P 500 since 2021. For investors prioritizing income, IAT currently offers a higher payout. The iShares fund paid $1.64 per share over the trailing 12 months, resulting in a 2.9% yield based on a recent share price of approximately $57.5. KBWB paid $1.87 per share over the trailing 12 months, equating to a 2.1% yield on a recent share price of roughly $87.6.

Cost structures for the two ETFs are similar, with KBWB holding a slight advantage. The Invesco fund carries an expense ratio of 0.35%, while IAT charges 0.38%. Liquidity also varies between the two, with KBWB managing approximately $6.2 billion in assets under management compared to about $0.6 billion for IAT. This larger asset base may make KBWB marginally easier to transact for some investors.

The divergence in holdings reflects their different mandates. KBWB focuses on major money-center banks and very large regional banks, providing a broader mix of financial institutions. IAT restricts its portfolio to U.S. regional banks only, offering a more concentrated exposure to that specific sub-sector. While KBWB leads in historical performance and cost efficiency over the last five years, IAT provides a higher dividend yield for those seeking income from regional banking stocks.