Abstract – Short interest in European banks has been on rise in the past 12 months. In this note, we review the most shorted European banks and present short sellers with the largest short positions. Further, we consider the most recent changes in bank shorts as well as country-specific developments.

Most Shorted European Banks

European banks shorts gained considerable attention of market participants in the past 12 months. E.g. in mid-2016 Soros and Marshall Wace were in focus with their Deutsche Bank shorts, in July short selling was banned in Banca Monte dei Paschi, while more recently Steve Eisman views were brought to attention: “it is evident he has one major target in mind: continental Europe’s banks – and Italy’s are probably the worst”, the Guardian, Nov. 19.

Table 1: Most Shorted European Banks

In the following we attempt to shed some light on most shorted banks by considering several shorting aspects.

Aggregated MostShorted records as of Nov 21st indicate 37 currently active significant short positions in European banking sector.(*) The most targeted are Italian banks with 18 shorts spread over 8 banks, while Spanish banks are 2nd most targeted with 6 shorts over 4 banks.

Table 1 shows aggregated significant short postion of 5 most shorted European banks. Note that 3 of 5 most shorted banks are Italian, reinstating previously noted skew towards Italy. In addition to the latest short interest, table depicts short interest 1-year ago, emphasising rise in bank shorts.


Table 2: Top Position Holders

AQR & Marshall Wace

Position holders with the most bank shorts are AQR Capital Management and Marshall Wace with 11 and 6 significant shorts, respectively. AQR holds 4 Italian, 3 Spanish, 3 Swedish and 1 German bank in their disclosed short portoflio. Marshall Wace’s country split is: 4 Italian, 1 Spanish and 1 German.

Based on available data, we estimate the value of AQR’s bank shorts to be somewhat above 1bn EUR. Out of that, aggregated Spain’s and Sweden’s banks shorts amount to about 400m EUR each, while Italy’s and Germany’s shorts are under 200m EUR each. The largest AQR short, in terms of EUR value, is about 190m EUR short in Spanish BBVA (Banco Bilbao Vizcaya Argentaria), a bank with strong presence in Mexico. The largest AQR short, in terms of % short interest, is a 2.87% short in Banco Popular Espanol.

Estimated value of corresponding Marshall Wace shorts is considerably smaller and is about 300m EUR, with almost 50% in Deutsche Bank.


Recent Changes in Bank Shorts

In the remainder of this note we focus on AQR and Marshall Wace noting several changes in short positioning since mid-October:

  1. Marshall Wace trimmed several bank shorts in November. Deutsche Bank short went from October high of 1.02% to 0.66%, while Commerzbank short went from 1.33% to under 0.5%. Furthermore, their UK and Sweden banks shorts in CYBG plc, Royal Bank of Scotland Group and SEB were reduced in November and are below 0.5% as of latest disclosure.
  2. In contrast to that, Marshall Wace short in Banco Popular Espanol increased during the observed period.

  1. Since mid-October AQR short in Banco Popular Espanol also rose, while their shorts in Unione di Banche Italiana and Banco Popolare Societa Cooperativa got trimmed. The most recent addition is, above-mentioned, about 190m EUR short in Spanish BBVA (Banco Bilbao Vizcaya Argentaria).
Shorting European Banks

Shorting European Banks

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(*) Data presented in this note is limited to significant short positions which at least equal 0.5% of company issued capital. Data presented is as of November 21st, 2016.

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