Regional Banks Sector (KRE)
Cleanest read on US credit stress and CRE exposure.
SPDR S&P Regional Banking ETF (KRE) · Profile updated 2026-05-03
Macro Context
Regional Banks is not a sector in the GICS taxonomy but deserves its own dashboard as the single cleanest barometer of US banking-system stress. KRE's 140+ holdings span community and regional banks ($5-100B asset range), each with heavier local-economy and commercial real estate exposure than the money-center banks in XLF.
The sector's defining event was March 2023: SVB, Signature Bank, and First Republic failed within three weeks. KRE dropped from $60 to $40 in that window and has not fully recovered. The mechanism was deposit flight plus unrealized losses on held-to-maturity securities portfolios; mark-to-market, many regional banks had negative tangible common equity.
Post-crisis, Fed and FDIC created the Bank Term Funding Program (BTFP) to backstop HTM losses. The program expired in March 2024, adding stress in Q2 2024. Commercial real estate (CRE) exposure remains the primary concern: regional banks hold roughly 70% of US CRE loans, with office CRE under the most pressure. The 2025-2026 refinancing wall will force additional writedowns.
Convex tracks KRE alongside the KRE/SPY ratio, KRE/XLF ratio (regional vs money-center), HY credit spreads, and regional-bank deposit trends. A KRE/SPY underperformance of more than 15% over 30 days typically precedes broader credit stress visible in HY OAS.
Primary Drivers
- ›Commercial real estate loan quality
- ›Deposit flight and funding costs
- ›Held-to-maturity unrealized loss trajectory
- ›2025-2026 CRE refinancing wall
- ›Regional-bank M&A activity
Convex Watch Signals
- ›KRE/SPY and KRE/XLF ratios
- ›Regional-bank deposit growth
- ›CRE delinquency rates by region
- ›Office vacancy rates
- ›HY credit spreads (contagion proxy)
Regime Behavior
- Goldilocks
- Modest tailwind. Normalizing credit plus rate stability.
- Reflation
- Leads. Steepening curve plus loan growth.
- Stagflation
- Mixed. NIM benefits offset by credit stress.
- Deflation
- Lags worst. Falling rates plus accelerating defaults.
Live Related Indicators
Related Glossary
Frequently Asked Questions
What drives the Regional Banks sector?+
Regional Banks (KRE) is primarily driven by commercial real estate loan quality, deposit flight and funding costs, held-to-maturity unrealized loss trajectory. These are the factors that move the ETF on both a cyclical and structural basis and where Convex focuses sector-specific data ingestion.
Which macro regime favors Regional Banks?+
Regional Banks typically leads in a Reflation regime. Detailed regime behavior: Goldilocks, Modest tailwind. Normalizing credit plus rate stability. Reflation, Leads. Steepening curve plus loan growth. Stagflation, Mixed. NIM benefits offset by credit stress. Deflation, Lags worst. Falling rates plus accelerating defaults.
Which signals should I watch for Regional Banks?+
Convex tracks the following for Regional Banks: KRE/SPY and KRE/XLF ratios; Regional-bank deposit growth; CRE delinquency rates by region; Office vacancy rates; HY credit spreads (contagion proxy). These surface the earliest evidence of sector rotation or regime change.
What is the KRE ETF?+
SPDR S&P Regional Banking ETF (KRE) provides equity exposure to the US regional banks sector. The ETF is the primary vehicle Convex uses to track sector performance and relative strength versus the broader index.
How does Regional Banks compare to the S&P 500?+
Over the past 90 days, KRE has underperformed the S&P 500 by 2.68 percentage points. Convex tracks the KRE/SPY ratio continuously as a leadership barometer; the current reading is discussed in the regime notes.
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Related Sectors
Sector profile compiled from Convex macro research and live ETF data. Weightings approximate current S&P 500 composition and shift with market capitalization. For informational purposes only, not financial advice.