Not only is Bank of America a poor proxy for U.S. banking, but so is ProShares Ultra Financials itself. Banks account for 36% of the ETF's weighting, with insurance making up 22% and real estate 12%. Real estate investment and services stocks were the worst-performing industry group on the S&P 500 Index today, dropping as much as 4.9%.
PowerShares Dynamic Banking Portfolio (PJB) more closely follows the U.S. banking industry. The ETF is based on the Dynamic Banking Intellidex Index. Its 30 members include First Horizon National (FHN), the largest holding, and Bank of Hawaii (BOH). Large-cap companies account for less than 5% of the ETF.
PowerShares Dynamic Banking Portfolio handed investors a smaller loss than did ProShares Ultra Financials, as its holdings are less volatile. For investors who want to make money on a rebound in banking, they would do well to review which exchange traded funds tap into the industry most directly.