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Is There a Banking Crisis?
June 08, 2023

On a recent episode of ETF 360, ProShares Head of Investment Strategy Simeon Hyman, CFA, joined VettaFi head of research Todd Rosenbluth to discuss challenges in the financial sector and how investors can avoid them.

Rosenbluth kicked things off by asking Hyman if a banking crisis is underway. “It doesn’t look that way,” said Hyman. “What we’ve seen from a month ago is more about a little bit of an asset liability mismatch and not a credit crisis.”

Hyman expressed that banks own long-term Treasurys. With interest rates having gone up, these banks have lost money. “If you had a lot of those, that can cause a problem for you as an individual bank, but it’s not a credit crisis.”

Just because there is no crisis, however, doesn’t mean banks are going to prosper, according to Hyman. “The key here is the cost of those deposits. You bring in those deposits so you can lend out that money,” he said. He also noted that one large bank had seen deposit costs rise from 8 basis points to 80.

“Guess what? 80 basis points is still far below the 4% or 5% people are seeing in money market funds. A crisis of contagion? No. But perhaps a challenge for profitability and prospering for these banks in the near term,” Hyman said.

Going Ex-Financials

ProShares offers the ProShares S&P 500 Ex-Financials ETF (SPXN) which provides exposure to the S&P 500, minus all financials.

“It simply surgically removes financials from the S&P 500,” Hyman said, offering that SPXN is a quick and easy way for investors who are concerned about the financial sector to strategically step out of it while remaining invested in other sectors that could potentially fare better.

Aside from being a tool for investors who are wary of financials, it could be a useful tool for people who work in that sector and rely on it doing well to diversify.

This is not intended to be investment advice.

Diversification may not protect against market risk.

ProShares is not affiliated with VettaFi.

There is no guarantee that distributions will not be made in the future. There is no guarantee that dividends or interest income will be paid.

There is no guarantee any ProShares ETF will achieve its investment objective.

Shares of any ETF are generally bought and sold at market price (not NAV) and are not individually redeemed from the fund. Your brokerage commissions will reduce returns.

This fund is exposed to the stocks of large-cap companies, which tend to go through cycles of outperformance or underperformance lasting up to several years relative to other segments of the stock market. As a result, large-cap returns may trail the returns of the overall stock market or other market segments.

Carefully consider the investment objectives, risks, charges and expenses of ProShares before investing. This and other information can be found in their summary and full prospectuses. Read them carefully before investing.

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