zeb etf review

ZEB ETF Review: BMO Equal Weight Banks Index

In this post, we will discuss one of the most popular Canadian Bank ETFs: ZEB BMO Equal Weight Banks Index. We will review ZEB’s historical performance and compare to similar ETFs in the market.

ZEB: Investment objective

The BMO Equal Weight Banks ETF has been designed to replicate, to the extent possible, the performance of the Solactive Equal Weight Canada Banks Index, net of expenses. The index includes the major Canadian banks with a balanced allocation as you can see in the composition of the portfolio below.

Banking sector perspectives 2022

  • How to explain the great performance of the Canadian banking sector during the pandemic?

News of faster economic growth than anticipated seem to have favored the banking sector in the past months. Large Banks benefited from:

1-Trading: revenues are soaring from an exceptional year. Retail investors were abnormally active and trading much more than usual which increased commissions’ revenues for Banks;

2-Releasing large sums of money that were held in reserves to hedge against expected loan losses due to pandemic. These losses never materialized.

  • What’s next for the banking sector?

The Banking sector is poised to benefit from a tighter monetary policy. This is because rising rates will help in boosting profits for banks, insurance companies, discount brokerage firms and asset managers. The difference between short and long-term interest rates is likely to improve banks’ net interest margins.

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ZEB ETF review: AUM, MER and Dividend yield comparison

AUM
in M
MER
%
Div
Yld
FIE – Ishares CDN Fin
Mthly Income
9780.895.85
ZEB -BMO S&P TSX
Equal Weight Banks Indx
2,8000.283.08
ZWB –BMO Covered
Call Canadian Banks
2,7000.725.37
XFN –iShares S&P/TSX
Capped Financials Index
1,9000.612.66

As of January 31st 2022 – Source: TD Market ResearchMER for ZEB was reduced to 0.28% following a reduction announced by BMO in August 2021

ZEB ETF review: Performance comparison

6M3Y5YBeta
5yrs
FIE9.2414.629.741.2
ZEB16.6917.5612.471.0
ZWB13.3613.629.730.9
XFN14.2616.5411.271.0

As of January 31st 2022 – Source: TD Market Research

Based solely on historical performance, ZEB -BMO S&P TSX Equal Weight Banks Index had the best performance in the past 5 years. In addition, the fund pays around a 3% dividend yield. The management expense ratio is at 0.28%, which is the lowest among our list.

For income seekers, FIE Ishares CDN Fin Mthly Income offers an attractive dividend yield above 5%. 

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ZEB Morningstar rating

Rating: 4 out of 5.

ZEB Holdings

Weight (%)Name
17,18%BANK OF MONTREAL
16,90%TORONTO-DOMINION BANK/THE
16,78%CANADIAN IMPERIAL BANK OF COMMERCE
16,59%NATIONAL BANK OF CANADA
16,50%ROYAL BANK OF CANADA
15,86%BANK OF NOVA SCOTIA/THE
0,19%CASH

Please consult issuers’ website for up-to-date data

ZEB dividends

Distrib
Period
Ex-Div
Date
Pay
Date
Total
Distrib
Per Unit
Jan, 2022Jan 27Feb 020.1200
Feb, 2022Feb 24Mar 020.1200
Mar, 2022Mar 29Apr 04
Apr, 2022Apr 27May 03
May, 2022May 27Jun 03
Jun, 2022Jun 28Jul 05
Jul, 2022Jul 27Aug 03
Aug, 2022Aug 29Sep 02