During the recent turmoil in the financial industry
Funds that bet on the collapse of Silicon Valley Bank are estimated to have made $1.3 billion in profits. Photo A. P.
The recent crisis on both sides of the Atlantic, which shook the sector and was the worst after that of 2008, gave opportunities for speculation to those interested, as the British newspaper Financial Times reports in this regard. In particular, hedge funds made more than $7 billion in profits betting on banking stocks, with the biggest gains coming during March, which turned out to be a bleak month for financial institutions. During his tenure and within a few days, the US bank Silicon Valley Bank collapsed and the once mighty Credit Suisse was urgently bought by UBS to prevent it from going bankrupt. These developments adversely affected the sector in general and the German Deutsche Bank in particular. With its share price plummeting, German Chancellor Olaf Scholz himself was forced to dismiss concerns about its viability, while California-based US mid-sized First Republic was rescued by larger rivals.
< p>Short sellers, who borrow stocks and sell them, hoping to buy them back at a lower price, posted an estimated total profit of about $1.3 billion, betting against the survival of US-based Silicon Valley Bank, according to the Ortex data analysis. In addition, profits of $848 million came from bets against First Republic, whose shares fell 89% in March. And in the case of troubled Swiss banking group Credit Suisse, investors made $684 million as the severe crisis of confidence plaguing it caused its stock to plummet 71%, according to relevant data. Shorting profits across the entire US and European banking sector totaled $7.2 billion.
“March was the most profitable month since the 2008 crisis for those borrowing stocks and selling them, hoping to buy them cheaper,” Peter Hillerberg, co-founder of Ortex, told the Financial Times. And while bank shares also fell sharply in early 2020 at the start of the coronavirus pandemic, there were fewer investment funds betting against them to cut their profitability, he added. Additionally, Barry Norris, chief investment officer at Argonaut Capital, said March was an impressive month, thanks to stock market bets against banks such as Credit Suisse and First Republic. Investment funds under the Argonaut Absolute Return brand have returned 6% or more. London-based Marshall Wace, one of the world's largest hedge fund groups, was also among those placing bets – one of which was on a 0.7% decline in Deutsche Bank shares. These funds ultimately made about $40 million in profits from bets against the German financial group, as reported by the Financial Times.
