Short sellers targeted Toronto-Dominion Bank, known in Quebec as TD Bank, with $3.7 billion in bearish bets on bank stocks. According to you, she could be the one besides falling due to the turbulence of global banking industry.
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With $3.7 billion in stakes, Toronto-Dominion Bank is now the most short-selling financial institution, according to data released by analyst firm S3 Partners.
French bank BNP Paribas is second in shorting with almost $3 billion in short sales, followed by Bank of America with around $2.74 billion.
“Short sellers have been actively selling short in a declining banking sector,” said Ihor Dusanivsky, managing director of predictive analytics at S3 Partners.
According to Dusaniwsky, short sellers had access to a windfall in March when Canada-listed TD fell 11%. But given recent stock price volatility, he said, the trend could be short-lived and changing quickly.
Bank failures, an industry in crisis
Global bank stocks have been under pressure in recent weeks following the collapse of Silicon Valley Bank and New York’s Signature Bank, fueling fears of a rebound.
Credit Suisse, in turn, nearly collapsed, but was eventually rescued by rival group UBS.
TD Bank’s fears can be explained by analysts’ minority stake in Charles Schwab, which suffered a stock market crash in March, and its relationship with the shaky US market, according to a Bloomberg report.
Additionally, TD Bank is reportedly currently invested in a $13.4 billion project for Tennessee-based First Horizon Bank, which is being discouraged by the company’s shareholders.
Another scenario in Canada
Fortunately, Canada’s banking system is known for its solidity, good governance and world-class financial framework. In more than 20 years, the United States has seen hundreds of bank failures while Canada has seen none.
Furthermore, this large short sale comes as no surprise to Philip Petursson, chief investment strategist at IG Wealth Management, as TD has a strong presence in the United States, he told BNN Bloomberg in an interview.
“I think it’s a play on the commitment of TD Regional Bank. But I wouldn’t stress or fear TD’s prospects that much,” Petursson said.
ARCHIVE PHOTO JOEL LEMAY
According to him, Canadian banks have resisted similar cases in the past.
“TD is great at managing risk. And I think they managed their US engagement very well. I believe short selling will be defeated,” he concluded in an interview.
Bloomberg News clarified that liquidity issues within the Canadian sector are rare. According to Bloomberg, TD Bank is Canada’s second largest bank.
- What is a short sale (VAD)?
Short selling is selling a security that you do not own but think will fall in order to realize a capital gain. According to TD Bank’s website, VAD is a strategy to generate profits when a stock’s price falls. This strategy provides leverage: investors sell the stocks they borrowed from a lender in hopes that their value will go down. They therefore hope to buy back these securities at a lower price than when they started.