The Global Big Bank ETF Portfolio

Spend enough time lurking in Canadian investing communities on Reddit and you'll quickly notice how much love there is for bank stocks, particularly Canada's Big Six.

It's not uncommon to find someone who spent years working at one of the major banks and accumulated six figures of employer stock through compensation and employee share purchase programs. Other investors simply bought Canadian banks years ago and are now sitting on substantial capital gains alongside years of dividend payments. When an investment has worked that well, there can be a strong temptation to keep holding and adding to it.

I'm generally not a fan of that level of concentration. Even if the investment has performed exceptionally well, owning a large position in a single bank exposes you to considerable uncompensated risk. You're taking company-specific risks involving management, underwriting standards, loan losses, regulatory actions, litigation, cybersecurity, capital requirements and balance-sheet decisions without necessarily receiving a higher expected return for accepting them.

Concentrating exclusively in Canadian banks adds another layer. All six operate within broadly the same regulatory, monetary and economic environment. A deterioration in Canadian housing, rising consumer delinquencies, weaker business borrowing, changing Bank of Canada policy or a domestic recession could affect several of them simultaneously.

If you're adamant about maintaining a substantial allocation to banks, one way to improve diversification is to look outside Canada. Banks operating in different developed markets face different central bank policies, yield curves, housing markets, consumer borrowing trends, credit cycles, regulatory regimes and economic conditions. Those differences won't eliminate the sector risk that comes with owning bank stocks, but they can reduce dependence on the fortunes of one country's banking system.

For this exercise, I'm sticking with developed markets rather than adding the additional political, currency, regulatory and governance risks that can accompany emerging-market banks. Fortunately, Canadian investors have ETF options providing targeted exposure to major banks in Australia, Europe and the United States.

So that's what we're building today: the Global Big Bank ETF Portfolio, consisting of four niche banking ETFs allocated equally at 25% each to Canada, the United States, Australia and Europe. As with some of the more unconventional portfolios I cover, consider this more of a thought experiment than a serious model allocation. Investor beware!

Global X Enhanced Equal Weight Canadian Banks Covered Call ETF (BKCL)

For our Canadian allocation, we're going to dial both risk and complexity close to the maximum with BKCL. This ETF holds an approximately equal-weighted basket of Canada's Big Six banks. Global X then adds two features designed to increase the fund's distribution yield.

The first is 125%, or 1.25 times, leverage. Importantly, BKCL doesn't obtain that leverage through swaps in the same manner as a daily leveraged ETF. Instead, it uses cash borrowing, conceptually similar to purchasing securities on margin. That increases exposure to the underlying banks and therefore magnifies both their gains and losses, while introducing borrowing costs.

The second component is covered call writing. BKCL sells call options against portions of its bank holdings, collecting option premiums that can support its monthly distributions. The trade-off is that those calls can limit participation when the underlying bank stocks rally beyond their strike prices.

This isn't a simple strategy that writes at-the-money calls over 100% of the portfolio every month. The overlay is dynamic. Global X publishes statistics including the percentage of the portfolio currently covered by calls, the average moneyness of those options and the respective contributions of option premiums and underlying dividends to the fund's yield.

Combining leverage, bank dividends and covered calls produces considerable income. As of August 7, 2026, BKCL had an annualized distribution yield of 11.04%. You're paying quite a bit to get it, however. BKCL currently has a 1.61% management expense ratio (MER), plus a 0.27% trading expense ratio (TER).

BMO Equal Weight U.S. Banks Index ETF (ZBK)

Canadian banks might be pillars of our domestic economy, but they're considerably smaller than the largest U.S. financial institutions. Several major American banks are designated global systemically important banks, or G-SIBs, meaning regulators consider their failure capable of creating significant disruption. That designation comes with additional capital, liquidity and regulatory requirements.

We can access this part of the market through ZBK. Like many of BMO's sector ETFs, ZBK uses an equal-weight methodology. Instead of allowing the largest banks to dominate according to market capitalization, holdings banks receive approximately equal allocations when the index rebalances. The investable universe is still narrow enough that you'll recognize many of the industry's dominant names, including JPMorgan Chase, Bank of America, Citigroup, Wells Fargo and Goldman Sachs.

ZBK is considerably simpler than BKCL. There's no leverage and no covered call overlay, resulting in a much more modest 0.39% MER. The trade-off is income. ZBK currently has an annualized distribution yield of approximately 1.66%. Canadian investors should also remember that distributions received by the fund from its U.S. holdings are subject to the 15% foreign withholding tax before reaching the ETF.

Hamilton Australian Bank Equal-Weight Index ETF (HBA)

Canadians aren't alone in their affection for domestic bank stocks. Australian investors have a similarly concentrated banking system dominated by a handful of large incumbents, with the country's largest banks commonly referred to as the "Big Five."

HBA gives Canadian investors targeted exposure to this market by tracking the Solactive Australian Bank Equal Weight Index. The portfolio consists of five major financial institutions: Commonwealth Bank of Australia, National Australia Bank, Westpac Banking, ANZ Group Holdings and Macquarie Group. As with HCAL and ZBK, HBA is equal-weighted methodology

One important difference from our U.S. allocation is currency exposure. HBA hedges its Australian-dollar exposure back to the Canadian dollar. In practice, Hamilton uses currency hedges designed to offset movements between the Australian and Canadian dollars, allowing returns to more closely reflect the performance of the underlying bank stocks rather than fluctuations in AUD/CAD.

HBA currently has an annualized distribution yield of approximately 3.93%. According to its April 30, 2026, ETF Facts document, the fund has a 0.70% MER. That makes HBA more expensive than our straightforward U.S. bank allocation, but it gives the portfolio exposure to another developed-market banking system operating under its own monetary policy, housing market and credit cycle.

Evolve European Banks Enhanced Yield ETF (EBNK)

Rounding out our developed-market bank exposure is EBNK, which tracks the Solactive European Bank Top 20 Equal Weight Index, providing equal-weight exposure to 20 major European banks. The underlying universe spans several developed European markets, including the United Kingdom, Spain, France, Italy, Norway, Belgium, Finland, Denmark, the Netherlands, Germany, Austria and Sweden.

Like HBA, EBNK hedges its foreign-currency exposure back to the Canadian dollar. That's particularly relevant here because the underlying holdings can trade in several different currencies. The hedge attempts to reduce the extent to which movements in those currencies against the Canadian dollar influence the ETF's returns.

EBNK is also explicitly designed as an enhanced-yield strategy. It doesn't employ the leverage used by BKCL, but Evolve can write covered calls on up to 33% of the portfolio. Strike prices, expiration dates and the amount overwritten are selected with the goal of balancing additional option income against continued participation in gains from the underlying bank stocks.

That helps explain the considerably higher payout. EBNK currently has a trailing 12-month distribution yield of approximately 10.09%, with distributions made monthly. The options strategy also contributes to higher costs. According to its May 25, 2026, ETF Facts, EBNK has a 0.87% MER.

Why I Wouldn’t Invest in This ETF Portfolio

Put all four ETFs together at 25% apiece and you have exposure to four substantially different developed-market banking systems. You're diversifying across different central banks, interest-rate cycles, housing markets, currencies, credit conditions and regulatory regimes.

But it's important not to confuse geographic diversification with complete portfolio diversification. This remains a 100% allocation to one highly cyclical industry. A global financial crisis, credit contraction or other shock affecting banks worldwide could hit all four allocations simultaneously.

The Global Big Bank ETF Portfolio therefore works better as a thought experiment for diversifying an existing bank-stock obsession than as a blueprint for a complete investment portfolio.