Global Courant 2023-04-25 10:25:10
Short sellers significantly increased their bets against European banks Santander and ING in a turbulent month for the global banking sector. Stocks in Madrid-headquartered Santander saw the biggest rise in short-term interest rates among European banks since March 13, the week after the collapse of Silicon Valley Bank. This increase was $1.17 billion, according to CNBC Pro’s analysis of data from exchange provider Ortex. The bankruptcy of the SVB, partly due to losses on its bond investments, led to a global search for weakness in banks’ balance sheets. These developments fueled fears of contagion, causing stocks in the US and Europe to plummet. The data also showed that Dutch bank ING had the second largest increase in short-term interest rates with $1.12 billion in the same period to April 19. Swiss bank UBS, which was forced to bail out rival Credit Suisse last month, had the third-biggest rise in short-term interest rates. shorts for $542 million. Overall, short sellers increased their bets against 24 banks in the Stoxx Europe 600 Banks Index by $5 billion over the same period. The table below shows the 10 European banks with the largest increase in short positions between March 13 and April 19. ING and Santander did not respond to CNBC’s request for comment. Meanwhile, France’s BNP Paribas had attracted the largest short-term interest rate in dollar terms among European banks, followed by Santander and ING. These figures also show that a significant part of the short-term interest rates against Spanish and Dutch lenders have only arisen since the SVB crisis. The table below provides an overview of the 10 European banking stocks with the largest short-term interest rates as of April 19. Short selling, a practice of borrowing and selling a stock with the expectation of buying it back at a lower price to take advantage of the drop in value, has proven highly profitable for hedge funds betting against bank stocks. At the end of March, these funds had $7.25 billion in unrealized gains, marking their biggest windfall since the 2008 financial crisis, CNBC first reported earlier this month. Credit Suisse’s demise in March generated about $683.6 million in unrealized gains for short sellers who bet on its stock. Deutsche Bank was also hit by the banking crisis despite no apparent catalyst, netting short sellers $39.9 million in unrealized gains in March. However, the markets were less generous to investors who entered bearish trades in April. Reuters reported last week that short sellers are estimated to have lost $1 billion year-to-date this month. Investors were caught off guard as banking sector stress eased and more rate hikes were factored in, leading to a recovery in banking stocks. But despite the 11% rise in the Stoxx Europe 600 Banks Index, the rally will be short-lived. According to a study by Bank of America, fund managers reduced their bank exposure in April – to the lowest point since May 2020 – while moving into more recession-proof defensive sectors.
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Short sellers raise their stakes against these 2
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