Financial Institutions Marked As Target By Short Sellers
The first quarter of 2023 has brought some unnerving news for the banking sector, especially in the U.S. Just within March, three of the most notable banks have collapsed, chaining their effects to others in their vicinity and beyond.
On March 8, Silvergate Bank (SI:US), a prominent industry player working as the backbone for many digital currencies collapsed and just two days later, the safe haven for numerous IT startups Silicon Valley Bank (SIVB:US), fell to the ground. Shortly after on March 12, a full-service commercial bank Signature (SBNY:US) ceased its operations. The fall of these banks has caused turmoil in the capital markets and investors have significantly lost their trust in the banking sector.
Let's take a look at the short interests of a few of the most notable bank stocks in 2023.
First Republic Bank
First Republic Bank (FRC:US) is a commercial bank of the U.S. headquartered in San Francisco, currently having a market cap of around $2.937 billion.
At present, our data shows that nearly 28 million shares of the commercial bank are on loan, increasing more than a staggering 663% in just the month of March and equating to a 15% float. A utilization rate of nearly 43% and an average borrowing cost of 13.25%.
FRC stock plunged nearly 86% after the collapse of Silvergate. This may be the highlighting concern for short sellers to increase their bets against the commercial bank.
Credit Suisse (CS:US) is a Swiss global investment bank headquartered in Zurich. The bank currently constitutes a market capitalization of nearly $3.81 billion.
As of today, our data shows that the bank has witnessed an astounding increase of nearly 233% in just one month and currently has around 403 million of its shares on loan. This accumulates a utilization rate of almost 36% and a loan volume of nearly 10.6% on float. The bank currently has an average borrowing cost of around 5.8%.
After the collapse of its rivals based in the U.S, shares of Credit Suisse took a drastic hit as the stock plunged below CHF 2. This further marked the lowest point in the history of its stock, at CHF 0.8 on March 20.
Deutsche Bank AG
Deutsche Bank AG (DBK:GR), is a German multinational investment bank headquartered in Frankfurt, Germany. The bank is dually listed on the Frankfurt Stock Exchange and NYSE and possesses a market cap of almost €21.58 billion.
Currently, almost 44.26 million shares of Deutsche are present on loan, accumulating a percentage change of around 102% in one month. This equates to a high loan volume of around 44.26 million and a short interest of 2.14%. Utilization is 10.4%, while the cost to borrow the stock is 0.93%. Clearly, the whiff around the stock may prove to be bearish.
At present, the stock trades near €9.8 mark, experiencing a decline of almost 15% in its share price after March 8.
Barclays (BARC:LN), a British multinational bank has a current Market Capitalization of almost £23.5 billion.
The bank as of today has nearly 3.9 million of its shares shorted by the sellers, an increase of almost 94% in just this month, according to our data. Forming around a loan volume of 38.78 million and a utilization rate of nearly 1.5%. The global player has a short interest rate of 0.26% and an average borrowing cost of around 0.5%.
Amidst the issues revolving around the sector, the banking giant announced a week ago that it has decided to close down fourteen of its branches, possibly cultivating a reason for short sellers to increase their bets.
Short Sellers Pose a Profound Insight
Short sellers with their increasing bets don’t always imply that they are going to be absolutely flawless, it's often witnessed that extensively shorted stocks turn their fate and prove to grow exponentially. So, caution is always preferred when you see them increasing their bets.
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