These financials ETFs are getting slammed, but some new entries next week could help

Published Wed, Mar 15 20232:59 PM EDTUpdated Wed, Mar 15 20232:59 PM EDT

Financials ETFs are getting hit hard by fear that the collapses of Silicon Valley Bank and Signature Bank will ripple throughout the banking system. Some of the biggest funds, however, are set to get some reinforcements next week that could stem their losses. The financial sector is set for a big change next week, as long-planned changes to the GICS classification system take effect Monday. According to a March 2 summary of the changes from BMO strategist Brian Belski, the biggest names moving to the financials industry are Visa , Mastercard and PayPal . The changes will filter through to many passive sector funds that track indexes, particularly those that use indexes from MSCI and S & P Dow Jones. That encompasses many funds from Vanguard and State Street, according to CFRA head of ETF data and analytics Aniket Ullal, and includes two major ETFs for the financial industry: The Vanguard Financials Index Fund ETF (VFH) and the Financial Select Sector SPDR Fund (XLF). This change could be coming at a good time for ETF investors. While the collapse of Silicon Valley Bank has rattled the entire equity market, the payments stocks have held up much better than the financials sector funds. Visa and Mastercard each lost less than 2% between March 8 — when SVB announced it was attempting to raise more capital — and March 14. Meanwhile, the Vanguard and SPDR ETFs have shed about 8% each. PayPal has also outperformed, but to a lesser extend than the credit card stocks. And as concern spreads about banks, Wall Street appears to still be confident in the payments stocks. Mastercard, Visa and PayPal all have buy ratings from the majority of Wall Street analysts, according to Refinitiv. The changes could be particularly impactful for funds that are weighted by market cap, as Mastercard, Visa and Paypal combined would account for well over a 10% weight in the financials sector, according to BMO. The GICS changes were first announced in March 2022 and are not in response to the recent troubles in the banking sector. — CNBC's Michael Bloom contributed to this report.