Short Covering in Banking Stocks
Author:
Ihor Dusaniwsky
Managing Director of Predictive Analytics, S3 Partners
Matthew Unterman
Director of Predictive Analytics, S3 Partners
Central Banks around the world have been raising benchmark rates to battle rising inflation with the U.S. Federal Reserve, European Central Bank, Bank of England, and Swiss National Bank raising rates by fifty basis points yesterday and today. This interest rate volatility has flattened or inverted shorter term yield curves and increased revenue spreads for the banking sector. As a result, we are seeing short covering in both domestic and international banking stocks with $6.29 billion of buy-to-covers lowering worldwide banking short interest to $56.43 billion, a -10% decline in total shares shorted over the last thirty days.
The largest shorts in U.S.\Canadian listed banking stocks are:
Name
BBG ID
Country
SI % Float
S3 SI % Float
Short Interest
TORONTO-DOMINION BANK
TD CN
Canada
3.44%
3.32%
$4,053,577,188
JPMORGAN CHASE CO
JPM US
USA
0.75%
0.74%
$2,910,926,812
BANK OF NOVA SCOTIA
BNS CN
Canada
3.50%
3.39%
$2,075,412,158
CIBC
CM CN
Canada
4.39%
4.21%
$1,644,810,433
BANK OF AMERICA
BAC US
USA
0.58%
0.58%
$1,528,845,358
ROYAL BANK OF CANADA
RY US
Canada
1.03%
1.02%
$1,373,845,963
BANK OF MONTREAL
BMO CN
Canada
2.21%
2.16%
$1,343,334,250
CITIGROUP INC
C US
USA
1.45%
1.43%
$1,307,341,910
WELLS FARGO & CO
WFC US
USA
0.77%
0.77%
$1,254,054,929
TORONTO-DOMINION BANK
TD US
Canada
0.94%
0.93%
$1,112,486,700
NATL BANK OF CANADA
NA CN
Canada
4.19%
4.02%
$972,934,944
BANK OF MONTREAL
BMO US
Canada
1.54%
1.52%
$943,412,584
BANK OF NOVA SCOTIA
BNS US
Canada
1.56%
1.54%
$929,353,497
ROYAL BANK OF CANADA
RY CN
Canada
0.61%
0.60%
$804,117,825
COMMONWEALTH BANK OF AUSTRALIA
CBAUF US
Australia
0.61%
0.60%
$746,723,883
CIBC
CM US
Canada
1.59%
1.56%
$595,536,529
WESTPAC BANKING CORP
WEBNF US
Australia
0.94%
0.93%
$524,834,207
ICICI BANK LTD ADR
IBN US
India
0.65%
0.64%
$511,915,555
US BANCORP
USB US
USA
0.76%
0.76%
$500,808,977
NATL BANK OF CANADA
NTIOF US
Canada
1.82%
1.79%
$423,560,935
Total Sector Short Interest
-
-
1.86%
1.81%
$29,345,100,753
Short interest in U.S.\Canadian listed banking stocks decreased by -$4.34 billion, down -12.9%, over the last thirty days, consisting of $2.63 billion of short covering and $1.71 billion decrease in the share price of the shorted securities.
The largest change in short selling and short covering over the last thirty days in U.S. bank stocks were:
Name
Ticker
Country
SI % Float
S3 SI % Float
Short Interest
30D Change Shs Shorted
RIVER VALLEY COMMUNITY BANCORP
RVCB US
USA
0.01%
0.01%
$5,365
$4,678
COASTAL CAROLINA BANCSHARES
CCNB US
USA
0.02%
0.02%
$11,422
$460
BANKFIRST CAPITAL CORP
BFCC US
USA
0.00%
0.00%
$1,800
$280
Name
Ticker
Country
SI % Float
S3 SI % Float
Short Interest
30D Change Shs Shorted
BANK OF AMERICA
BAC US
USA
0.58%
0.58%
$1,528,845,358
($940,471,172)
JPMORGAN CHASE CO
JPM US
USA
0.75%
0.74%
$2,910,926,812
($220,815,011)
CITIGROUP INC
C US
USA
1.45%
1.43%
$1,307,341,910
($53,090,190)
WELLS FARGO & CO
WFC US
USA
0.77%
0.77%
$1,254,054,929
($26,011,455)
US BANCORP
USB US
USA
0.76%
0.76%
$500,808,977
($13,964,636)
The largest change in short selling and short covering over the last thirty days in Canadian bank stocks were:
Name
Ticker
Country
SI % Float
S3 SI % Float
Short Interest
30D Change Shs Shorted
TORONTO-DOMINION BANK
TD CN
Canada
3.44%
3.32%
$4,053,577,188
$296,876,807
BANK OF MONTREAL
BMO CN
Canada
2.21%
2.16%
$1,343,334,250
$207,037,944
ROYAL BANK OF CANADA
RY CN
Canada
0.61%
0.60%
$804,117,825
$82,200,904
TORONTO-DOMINION BANK
TD US
Canada
0.94%
0.93%
$1,112,486,700
$59,586,921
CIBC
CM CN
Canada
4.39%
4.21%
$1,644,810,433
$55,214,971
Name
Ticker
Country
SI % Float
S3 SI % Float
Short Interest
30D Change Shs Shorted
ROYAL BANK OF CANADA
RY US
Canada
1.03%
1.02%
$1,373,845,963
($1,218,047,305)
BANK OF MONTREAL
BMO US
Canada
1.54%
1.52%
$943,412,584
($549,857,252)
CIBC
CM US
Canada
1.59%
1.56%
$595,536,529
($85,551,712)
BANK OF NOVA SCOTIA
BNS CN
Canada
3.50%
3.39%
$2,075,412,158
($20,447,415)
NATL BANK OF CANADA
NTIOF US
Canada
1.82%
1.79%
$423,560,935
($12,911,846)
The largest change in short selling and short covering over the last thirty days in international bank stocks listed in the U.S. were:
Name
Ticker
Country
SI % Float
S3 SI % Float
Short Interest
30D Change Shs Shorted
HDFC BANK ADR
HDB US
India
0.24%
0.24%
$313,867,707
$101,785,269
INTESA SANPAOLO SPA
IITSF US
Italy
0.58%
0.58%
$197,819,568
$36,225,564
ING GROEP NV ADR
ING US
Netherlands
0.15%
0.15%
$67,568,517
$31,514,983
HSBC HOLDINGS PLC
HBCYF US
UK
0.12%
0.12%
$145,717,830
$18,212,898
UNICREDIT SPA
UNCFF US
Italy
0.46%
0.46%
$114,730,173
$15,385,206
Name
Ticker
Country
SI % Float
S3 SI % Float
Short Interest
30D Change Shs Shorted
ICICI BANK LTD ADR
IBN US
India
0.65%
0.64%
$511,915,555
($274,977,941)
HSBC PLC ADR
HSBC US
UK
0.23%
0.23%
$284,489,167
($27,360,927)
SUMITOMO MITSUI FINL GRP
SMFNF US
Japan
0.04%
0.04%
$16,145,641
($20,997,347)
ING GROEP NV
INGVF US
Netherlands
0.17%
0.17%
$76,001,680
($18,906,556)
COMMONWEALTH BANK OF AUSTRALIA
CBAUF US
Australia
0.61%
0.60%
$746,723,883
($18,309,618)
The largest shorts in internationally listed banking stocks are:
Name
Ticker
Country
SI % Float
S3 SI % Float
Short Interest
BNP PARIBAS
BNP FP
France
3.57%
3.45%
$2,165,444,829
COMMONWEALTH BANK OF AUSTRALIA
CBA AU
Australia
1.38%
1.36%
$1,677,919,452
ITAU UNIBANCO HOLDING SA PREF
ITUB4 BZ
Brazil
6.70%
6.28%
$1,421,896,301
INTESA SANPAOLO SPA
ISP IM
Italy
3.55%
3.43%
$1,216,825,151
SUMITOMO MITSUI FINL
8316 JP
Japan
2.22%
2.17%
$972,191,554
MIZUHO FINL GRP
8411 JP
Japan
3.31%
3.20%
$954,511,765
WESTPAC BANKING CORP
WBC AU
Australia
1.49%
1.46%
$834,149,228
MITSUBISHI UFJ FINANCIAL GRP
8306 JP
Japan
1.35%
1.33%
$782,869,081
HSBC HOLDINGS PLC
5 HK
UK
0.63%
0.62%
$754,836,161
POSTAL SAVINGS BANK OF CHINA CO
1658 HK
China
13.44%
11.85%
$736,482,361
BANCO DO BRASIL
BBAS3 BZ
Brazil
8.15%
7.54%
$697,475,048
BANCO BRADESCO PREF
BBDC4 BZ
Brazil
4.62%
4.42%
$624,229,484
CHINA MERCHANTS BANK
3968 HK
Hong Kong
3.05%
2.96%
$609,259,808
BANCO SANTANDER SA
SAN SM
Spain
1.19%
1.17%
$583,085,841
NORDEA BANK ABP
NDA FH
Finland
1.46%
1.44%
$498,377,506
CAIXABANK SA
CABK SM
Spain
3.67%
3.54%
$491,886,847
BANCO BILBAO VIZCAYA ARGENTA
BBVA SM
Spain
1.37%
1.35%
$481,800,246
CHINA CONSTRUCTION BANK
939 HK
China
0.79%
0.79%
$454,147,107
DBS GROUP HOLDINGS LTD
DBS SP
Singapore
0.99%
0.98%
$453,869,857
NATIONAL AUSTRALIA BANK LTD
NAB AU
Australia
0.63%
0.62%
$409,505,538
Total Sector Short Interest
-
-
3.05%
2.88%
$27,081,591,276
Short interest in internationally listed banking stocks decreased by -$2.73 billion, down -9.2%, over the last thirty days, consisting of $3.66 billion of short covering which was partially offset by a $0.93 billion increase in the share price of the shorted securities.
The largest change in short selling and short covering over the last thirty days in internationally listed bank stocks were:
Name
Ticker
Country
SI % Float
S3 SI % Float
Short Interest
30D Change Shs Shorted
SWEDBANK AB
SWEDA SS
Sweden
1.16%
1.15%
$193,128,927
$176,356,179
ITAU UNIBANCO HOLDING SA PREF
ITUB4 BZ
Brazil
6.70%
6.28%
$1,421,896,301
$144,553,941
SVENSKA HANDELSBANKEN AB
SHBA SS
Sweden
1.35%
1.33%
$191,056,474
$122,859,730
AIB GROUP PLC
AIBG ID
Ireland
3.27%
3.17%
$126,000,540
$122,622,465
BANK OF IRELAND GROUP PLC
BIRG ID
Ireland
1.60%
1.58%
$137,233,511
$115,844,637
SKANDINAVISKA ENSKILDA BANKEN
SEBA SS
Sweden
1.62%
1.60%
$292,729,416
$72,158,234
CAPITEC BANK HOLDINGS LTD
CPI SJ
S Africa
0.92%
0.91%
$113,618,538
$67,416,541
AOZORA BANK LTD
8304 JP
Japan
9.21%
8.43%
$202,427,539
$55,788,270
AIB GROUP PLC
AIBG LN
Ireland
1.48%
1.46%
$57,677,086
$54,232,195
BCO BRADESCO SA
BBDC3 BZ
Brazil
3.23%
3.13%
$110,051,573
$44,679,906
Name
Ticker
Country
SI % Float
S3 SI % Float
Short Interest
30D Change Shs Shorted
UNICREDIT SPA
UCG IM
Italy
0.90%
0.89%
$221,785,676
($429,730,802)
INTESA SANPAOLO SPA
ISP IM
Italy
3.55%
3.43%
$1,216,825,151
($346,281,383)
COMMONWEALTH BANK OF AUSTRALIA
CBA AU
Australia
1.38%
1.36%
$1,677,919,452
($388,283,003)
BANCO BRADESCO PREF
BBDC4 BZ
Brazil
4.62%
4.42%
$624,229,484
($201,332,956)
BANCO BILBAO VIZCAYA ARGENTA
BBVA SM
Spain
1.37%
1.35%
$481,800,246
($332,239,301)
NATIONAL AUSTRALIA BANK LTD
NAB AU
Australia
0.63%
0.62%
$409,505,538
($233,370,923)
DBS GROUP HOLDINGS LTD
DBS SP
Singapore
0.99%
0.98%
$453,869,857
($200,332,619)
BNP PARIBAS
BNP FP
France
3.57%
3.45%
$2,165,444,829
($337,932,840)
AUSTRALIA & NZ BANKING GROUP
ANZ AU
Australia
0.53%
0.52%
$256,934,993
($187,800,990)
WESTPAC BANKING CORP
WBC AU
Australia
1.49%
1.46%
$834,149,228
($160,156,335)
With yield curves in the U.S., Canada, Europe, and the rest of the world inverted or flattening we are seeing price and trading volatility in the interest sensitive banking sector. We are seeing banking short interest decline along with increases in Central Bank funding rates. Banking short interest has been declining hand in hand with increases in the Fed Funds rate.
With Central Banks not signaling an end to their rate increases any time soon, we should expect more short covering in the banking sector if the recent trend continues. Bank stock shorts are trimming their positions even though they are out-performing the average shorts in the market recently. For the year, banking shorts slightly underperformed with a +21.64% versus +22.84% return for all shorts. But since the U.S. Federal Reserve started raising rates in March, banking shorts have performed better than the average market short, up +16.09% versus +13.90% since the end of February and up +0.76% versus down -0.76% for all shorts over the last thirty days.
Shorts are reducing exposure in the profitable short-side banking sector, implying that they are looking for recent stock price weakness to bottom out or at least underperform on the short-side relative to other sectors. The major question remains, does banking sector performance gain momentum in anticipation of the cessation of Central Bank rate increases or afterwards? Recent short covering in the sector seems to indicate that shorts are covering before the Central Banks reach their rate targets, getting out before a bank sector rally eats up their unrealized gains. If the long side eventually start buying into the sector, we may see a quick upswing in stock prices as short side price resistance will be minimal or nonexistent.