Short sellers are sitting on almost $2 billion in profits from bets against the European banking sector so far this month. And, perhaps surprisingly, Credit Suisse wasn’t the most profitable short position. Instead, France’s largest bank BNP Paribas topped the list, raking in $357 million in (unrealized) gains for short sellers in March at midday on March 15, according to stock data provider S3 Partners. Sellers benefit when a stock falls. They borrow shares to sell immediately with plans to buy them back later when the price is lower and profit on the difference. The table below shows five of the most profitable banking deals for short sellers in March: Bank stocks around the world began falling on contagion fears in light of last week’s Silicon Valley bank collapse. Concerns in Europe mounted on Wednesday as Credit Suisse shares fell 24% – their biggest drop of the day. As a result, short sellers betting against Credit Suisse were up $238.6 million in unrealized gains for the month as of midday Wednesday, according to S3 Partners. However, data shows that Credit Suisse – Switzerland’s second-biggest lender – doesn’t even make the list of the five most cut European banks. BNP Paribas remains the top target for short sellers, with a total of $3.1 billion in wagers where shares are expected to fall. Their shares are down 20% so far in March, making them among the biggest losers among the big banks in the Stoxx Europe 600 Banks Index. The table below shows the largest short sellers in the European banking sector: Italy’s two largest lenders, Intesa Sanpaolo and Unicredit, were the second and third largest targets for short sellers, who together attracted almost $2.5 billion in bets against them. Spain’s Banco Santander and Hong Kong-listed HSBC Holdings rounded out the list. Bets against the European banking sector have increased over the past month, rising by $5.42 billion. Short sellers increased their stakes by $1.3 billion in the last 30 days against Unicredit alone. The table below shows the European lenders that saw the largest increase in short selling over the last 30 days. These potentially highly profitable trades have not always been a worthwhile bet for short sellers. According to Ihor Dusanivsky, Managing Director at S3 Partners, bets against European banks have seen unrealized losses of $1 billion year-to-date Mark-to-market earnings are up month-to-date, up 8.04% at an average short rate of $23.52 billion,” he said in an email to CNBC Pro. Hedge funds, many of which hold short positions, have also suffered significant losses elsewhere in their portfolios due to large short-term swings in stock and bond prices. Strategists at Swiss investment bank UBS said many of these funds were flat until last week’s market turmoil but have quickly lost more than 4% in total value. As a result, UBS said in a March 15 note to clients that many of these funds “significantly reduced their long positions in stocks, selling $25 to $30 [billion] Value of shares since SVB collapse announcement.” They also warned clients that “further selling flows are coming” that will eliminate hedge funds’ equity exposure in the near term.
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