Speculators build $16 billion bearish bet on Europe's banks

Citadel Income Fund

15/03/2023 17:05

By Nell Mackenzie and Pablo Mayo Cerqueiro
       LONDON, March 15 (Reuters) - Short sellers had amassed
bearish positions worth more than $15.7 billion against European
banks by Tuesday, after the collapse of Silicon Valley Bank
sparked contagion fears and sent shares plunging, according to
S&P Global Market Intelligence. 
    Big hedge funds including Marshall Wace and Odey Asset
Management added to short positions against Europe's banks,
regulatory filings seen by Reuters and data from Breakout Point
showed.
    Short selling involves borrowing shares from a broker to
sell them, with the expectation of buying them back at a lower
price to make a profit.
    Odey Asset Management and Marshall Wace declined to comment.
    Marshall Wace held the largest disclosed number of short
positions against banks, public filings from Austria, Italy,
Sweden, Britain, Spain and Poland analysed by Breakout Point
showed. The banks included BAWAG  BAWG.VI , FinecoBank  FBK.MI ,
Handelsbanken  SHBa.ST , CaixaBank  CABK.MC , NatWest Group
 NWG.L  and PKO Bank Polski  PKO.WA . 
    Handelsbanken, Mediobanca  MDBI.MI , BNP Paribas  BNPP.PA ,
Credit Suisse  CSGN.S , Close Brothers  CBRO.L , Deutsche Bank
 DBKGn.DE  were among financial firms that ended Tuesday with
the highest proportion of shares on loan to short sellers,
according to S&P Global Market Intelligence. 
    The 113 lenders tracked by the researchers saw an average
increase of 5% of shares out on loan between March 10 and 14.
    The data did not cover the drop in Credit Suisse shares on
Wednesday, which fell by as much as 30% at one point after its
top shareholder said for regulatory reasons it could not inject
more capital into the bank.
    Traders with short positions on Credit Suisse could, 
according to market prices, potentially have made month-to-date
profits of up to $238.6 million and year-to-date profits of up
to $192.4 million, research from S3 Partners showed. 
    BNP Paribas shares fell by as much as 12% on Wednesday
before recovering to show a loss of 9%, while Deutsche Bank
shares fell almost 9%. 
    In the week to Wednesday, some 120 billion euros ($126
billion) had been wiped off the value of European bank shares.
    "It's a panic selloff with little thinking about the
fundamentals," said Jerome Legras, head of research at Axiom
Alternative Investments, when asked if there was any correlation
between the banks being shorted. 
    The rout began after Silicon Valley Bank was forced to sell
a portfolio of bonds at a loss to meet the demands of its
customers who wished to withdraw funds, prompting fears of a
liquidity crunch at other financial institutions. 
    ($1 = 0.9501 euros)

 (Reporting by Nell Mackenzie; Editing by Amanda Cooper and Mark
Potter)
 ((Nell.Mackenzie@thomsonreuters.com;))