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Short sellers made their largest profits since the financial crisis

By the end of March, short sellers had accumulated more than $7 billion in profits from the sell-off of bank shares. This was their largest windfall since the global financial crisis in 2008. A chaotic month for global banking was dominated by the collapse of Silicon Valley Bank and the rescue of Credit Suisse by domestic rival UBS. Shares tumbled in the U.S. and Europe on fears of contagion, and the losses were compounded by further monetary policy tightening by the U.S. Federal Reserve. Short selling involves borrowing an asset and selling it to make money by pocketing the difference and profiting from its decline in value. Over the month, hedge funds shorting bank stocks had unrealized gains of $7.25 billion. “ORTEX data shows that March was the single most profitable month for short sellers in the banking sector since the 2008 financial crash,” co-founder Peter Hillerberg said Thursday.
According to the data, those with short bets against the failed SVB topped the pile with unrealized profits totaling more than $1.32 billion. Over the course of the month, First Republic’s shares dropped 89%, earning short sellers almost $848 million. In March, short positions against Credit Suisse’s Swiss-listed stock made around $610 million in unrealized profits, according to Ortex data. Short positions on its Swiss- and U.S.-listed shares generated a combined $683.6 million profit. German Chancellor Olaf Scholz declared publicly that Deutsche Bank is a “very profitable bank” and that there is “no reason to worry” due to the banking crisis ripple effect. Deutsche stock yielded an unrealized $39.9 million for short sellers in March.