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Investors betting $3.7 billion against Toronto-Dominion Bank in world's biggest bank short

Published 2023-04-05, 10:22 a/m
© Reuters.  Investors betting $3.7 billion against Toronto-Dominion Bank in world's biggest bank short
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Proactive Investors - In a bad sign of things to come short sellers have accumulated a staggering $3.7 billion in wagers against Toronto Dominion Bank (TSX:TSX:TD) (TD).

As a result, investors have made the Canadian lender the most-shorted bank in the world, according to Bloomberg.

In recent weeks, short sellers have upped their bearish bets against TD Bank, and now have roughly US$3.7 billion on the line vis-à-vis Canada’s second-largest lender, Bloomberg reported, while citing an analysis by S3 Partners.

That’s the most among financial institutions globally and puts TD ahead of the likes of France’s BNP Paribas (EPA:BNPP) SA and Bank of America Corp (NYSE:NYSE:BAC), said the financial news agency. The short interest obviously suggests increased investor wariness toward TD and the American banking system.

Part of it has to do with “the general skittishness” toward the banking sector after three US regional banks failed and Credit Suisse (SIX:CSGN) was forced into a “shotgun wedding with UBS Group AG (SIX:UBSG) (NYSE:UBS),” said Bloomberg, while adding that analysts also point to worries about TD’s exposure to the country’s housing slowdown, as well as its ties to the US market through its stake in Charles Schwab (NYSE:NYSE:SCHW) Corp and a planned regional bank acquisition.

The Canadian lender has also had its fair share of problems this year. In February, TD bank agreed to pay $1.2 billion to settle claims stemming from the Canadian bank’s involvement in the high-profile Ponzi scheme perpetrated by convicted swindler R. Allen Stanford, resolving nearly all outstanding litigation related to the fraud.

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Moreover, TD’s position atop the list of biggest bank shorts comes as it ambitiously plans to close a $13.4 billion deal for Memphis, Tennessee-based First Horizon Corp, which would expand its foothold in the US. First Horizon is the largest bank in Tennessee and the fourth largest in the southeast United States, according to industry analysts.

“TD is widely expected to renegotiate the deal after the recent bout of turmoil among US regional banks drove share prices lower in March,” reported Bloomberg.

Some TD shareholders have also urged the Canadian bank to ditch or renegotiate First Horizon deal.

Investors reacted to the news, sending TD bank shares down nearly 3% to $58.77 on the New York Stock Exchange in morning trade.

Read more on Proactive Investors CA

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