How to Invest in iShares US Regional Banks ETF (IAT) #NewsETFs

iShares US Regional Banks ETF (IAT 1.57%) is a top exchange-traded fund (ETF) with net assets of approximately $618 million. The fund is part of BlackRock’s (BLK 0.53%) iShares collection of ETFs, most of which track the performance of a particular stock market index or bond market index. iShares is the top provider of ETFs by assets under management (AUM), and the iShares US Regional Banks ETF was first launched in May 2006.

ETFs can offer a great approach to diversify your holdings in different assets like stock and bonds while getting instant exposure to numerous investments. ETFs can also lend steady dividend income to your portfolio to reinvest or add as cash on the sidelines as you like. If you’re interested in investing in the iShares US Regional Banks ETF, here’s what you need to know about how to buy shares, the holdings of this ETF , its dividend, expense ratio, and more.

What is it?

What is the iShares US Regional Banks ETF?

The iShares US Regional Banks ETF aims to track the investment performance and returns of the Dow Jones U.S. Select Regional Banks Index, which is an index that features U.S. equities in the regional banking sector. This ETF provides investors exposure to a variety of small to mid-size banks in the U.S.

How to invest

How to buy the iShares US Regional Banks ETF

It’s very easy to invest in the iShares US Regional Banks ETF. You can buy shares through your preferred brokerage account. Here’s a step-by-step guide to buying shares of the ETF.

Step 1: Open a brokerage account

If you don’t already have a brokerage account, you need to open one. Creating an account with your preferred brokerage should only take a few minutes, and you can usually choose from a wide range of investment products. You also can buy individual stocks, bonds, mutual funds, and other assets through almost any reputable brokerage account.

Some of these platforms offer more benefits to users than others, so you’ll need to decide what elements are important to you. Consider factors such as account fees, transaction fees, commissions, and trading fees, as well as the resources, services, and customer support that the platform offers. Many investors are happy with an online-only platform, while others prefer one that is connected to a bank where you can go visit with a representative at a brick-and-mortar location if need be.

Step 2: Figure out your budget

Before you invest in the iShares US Regional Banks ETF or any other type of investment, you need to determine your budget for how much money you want to invest. Then, you need to decide the best approach to allocate those funds. Ideally, you should be working towards building a diversified portfolio of 25 or more stocks that you plan to hold for a minimum of three to five years, and preferably longer.

Your investing capital shouldn’t just be diversified across various stocks or other investments, but represent a variety of industries and sectors so that you’re not overly exposed to a potential growth driver or detractor in your portfolio. One of the great things about investing in iShares US Regional Banks ETF is that you’re going to be automatically diversifying your investment capital in different companies in the banking sector.

So, if you want to build your exposure to the banking sector in your portfolio, you can buy this ETF and be completely diversified in terms of banking stocks on day one.

Step 3: Do your research

Make sure you thoroughly research any investment before you put your cash to work. When analyzing an ETF such as the iShares US Regional Banks ETF, take a look at similar funds and their expense ratios, as well as investment histories. Also, consider the fund’s holdings, the performance of the fund’s top holdings as individual businesses, and the fund’s overall investment strategy.

Step 4: Place an order

Once you’ve opened your brokerage account and it’s all funded and ready to go, you’re ready to buy shares of the iShares US Regional Banks ETF. Go to your brokerage account order page, search for stock ticker IAT, and fill in relevant information such as the number of shares you want to buy or the amount you want to invest to purchase in fractional shares.

Finally, decide whether you want to place a market order or a limit order with your broker. A market order is usually recommended over a limit order because that means you can buy shares right away at the current market price. With a limit order, your transaction will only proceed if shares of the ETF hit the price you specify, which may or may not occur or may happen after the limit order validity period expires.

ETF holdings

Holdings of the iShares US Regional Banks ETF

The iShares US Regional Banks ETF tracks the Dow Jones U.S. Select Regional Banks Index, which follows the performance of the regional bank subsector of the U.S. equities market. Accordingly, the ETF’s holdings are focused on regional banks, with 57.3% of holdings concentrated in this sector. The other 42.5% are concentrated in diversified banks, while 0.3% are invested in cash and/or derivatives.

The ETF has about 40 holdings in its portfolio. In late 2024, the top 10 holdings of the iShares US Regional Banks ETF included:

1. PNC Financial Services Group Inc (PNC 1.23%): 14.38%
2. US Bancorp (USB 1.96%): 13.96%
3. Truist Financial Corp (TFC 0.96%): 11.21%
4. Fifth Third Bancorp (FITB 1.06%): 4.97%
5. M&T Bank Corp (MTB 1.49%): 4.63%
6. First Citizens Bancshares Inc (FCNCA 1.2%): 4.36%
7. Huntington Bancshares Inc (HBAN 1.44%): 4.35%
8. Regions Financial Corp (RF 1.57%): 4.35%
9. Citizens Financial Group Inc (CFG 2.2%): 3.75%
10. Keycorp (KEY 1.35%): 3.17%

Should you invest?

Should I invest in the iShares US Regional Banks ETF?

Choosing investments for your portfolio is a personal decision. You need to ensure that any investment, iShares US Regional Banks ETF, other otherwise, aligns with your long-term investment goals, values, and risk tolerance. You should also have a general understanding and interest in the banking sector, and be willing to invest in the cyclicality that accompanies this space and particular type of investment.

The bull market has impacted a variety of industries and sectors in positive ways, and lifted parts of the previously beleaguered banking sector in the process. Like other areas of the banking sector, regional banks have experienced pressure over the last several years from the COVID-19 pandemic that inflicted a notable financial impact on borrowers and businesses, which was followed by the turmoil of a high-interest-rate environment.

Elevated interest rates have forced many banks to raise the rates they’re paying for consumer deposits amid an increasingly competitive banking system, and the aftermath of Silicon Valley Bank’s downfall also had an impact on investor appetite towards this sector. High interest rates have also diminished the value of bonds that banks typically hold on their balance sheet. Identifying these factors is not meant to discourage an investment in iShares US Regional Banks ETF but help investors understand the landscape that regional and even more diversified banks have been facing of late.

That said, these factors are slowly but surely fading in the backdrop. The underlying strength of the U.S. economy and its continued improvements are one such factor, as they lessen the concerns that the economy will have to deal with a recession. Inflation is slowly but surely receding, and the Federal Reserve’s recent and expected rate cut maneuvers are also reigniting investor sentiment in bank stocks.

Continued improvements in the macro environment can create better financial conditions for consumers and businesses over the long run, which will trickle down to regional banks, too. A diversified fund like iShares US Regional Banks ETF will open your portfolio up to experience returns from numerous top regional banks. That could be an excellent choice for investors who want to invest in the banking industry without taking on the risk of an investment in individual banking stocks.

Banking stocks tend to flourish in stable economic landscapes. As interest rates are coming down and worries about a recession abate, regional stocks look poised to do well, particularly as consumer spending and borrowing gradually accelerate. Investors who recognize all these factors and find iShares US Regional Banks ETF to pose an attractive portfolio opportunity can also benefit from steady dividend income, a low-cost and passive investment, and an investment that provides broad exposure to the U.S. regional banking sector.

These are all solid reasons to consider an investment in iShares US Regional Banks ETF, along with the fact that fewer industries are more highly regulated than banking. On the other hand, if you’re seeking an investment that can deliver index-beating returns, you’re more risk-averse and don’t want exposure to the cyclicality of banking, or you’re nearing retirement and need more income than the iShares US Regional Banks ETF might provide, it may be a wise choice to look elsewhere.

Dividends

Does the iShares US Regional Banks ETF pay a dividend?

The iShares US Regional Banks ETF pays a dividend that yielded roughly 3.3% in late October. Its dividend is paid on a quarterly basis, and has risen by approximately 12% in the trailing-three-year period alone. That yield is quite a bit higher than what the average individual stock trading on the S&P 500 pays, which is in the ballpark of 1.3%.

Expense ratio

What is the iShares US Regional Banks ETF’s expense ratio?

A low expense ratio can maximize investor returns and lessen the impact of fees on portfolio performance. The iShares US Regional Banks ETF has a favorable expense ratio of 0.40%, which is in line with the market average of about 0.50%.

The annual fee charged by BlackRock on a $10,000 investment in the iShares US Regional Banks ETF would be approximately $40.

Historical performance

Historical performance of the iShares US Regional Banks ETF

The iShares US Regional Banks ETF aims to closely track the average return of the Dow Jones U.S. Select Regional Banks Index. Let’s take a look at how the ETF has delivered on its objectives over the last year, three years, and five years.

As the chart shows, the fund’s returns have roughly matched those of the index it tracks.

Related investing topics

The bottom line on the iShares US Regional Banks ETF

The iShares US Regional Banks ETF is a leading ETF focusing on delivering returns that broadly match U.S. equities trading in the regional banking sector. The fund’s inception was less than two decades ago, and while the last several years have brought volatility for the sector, recovery has been steady as economic conditions and interest rates look increasingly favorable.

For long-term investors with an extensive buy-and-hold horizon, as well as the risk appetite to invest in bank stocks, this fund can be a great way to benefit from dividend income, the hundreds of billions of dollars that the regional banking sector represents, and a landscape where regional banking valuations across the board remain historically cheap.

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