Canadian banks have taken their lumps in 2020. The COVID-19 pandemic has throttled the economy and put Canada’s top financial institutions in a bind. In the second quarter, Canada’s banks saw provisions for credit losses balloon compared to the prior year. Today, I want to look at a bank-focused ETF that investors may want to consider in early August.
The BMO Covered Call Canadian Banks ETF (TSX:ZWB) is designed to provide exposure to a portfolio of Canadian banks while earning call option premiums. Shares of this ETF have dropped 13% in 2020 as of late afternoon trading on August 6. This comes after a 14% increase in 2019.
Investors who are looking at this fund can benefit from higher income from equity portfolios. It is also invested in a diversified portfolio of Canadian banks.
The call option writing reduces volatility. Its top holding is the BMO Equal Weights Banks Index ETF (TSX:ZEB). After that, National Bank, Canadian Imperial Bank of Commerce, and Bank of Montreal round out the top four.
The Big Six are nearly equally represented with only a few percentage points in differential.
Canadians who are eager for bank exposure while also seeking some protection should consider this top ETF in August. It even offers a tasty annual income distribution of 6.7%. Now is the time to buy-low on this attractive bank-focused ETF.
