As the end of the 3rd quarter approaches and with expectations managed downward, short sellers continue to increase bearish bets against the largest banks. S3 Partners real-time short interest analytics calculates that the real time dollars at risk on the short side has increased $1.9 billion since the end of the June quarter. The largest increases in exposure are Deutsche, Goldman and Wells Fargo, climbing 69.9%, 50.7% and 33.3% respectively. S3 estimates that short interest in the Global Banking Sector to be $7.5 billion, which is down $296 million month on month.
Leaders of some of these banks have disclosed that they anticipate trading revenues to be down 15-20% in 3Q. Jefferies Group (LUK), the 1st to announce earnings of the group, said trading revenues were down 7%. However, the bright spot for them was Investment Banking, where they announced record fees. Jefferies stock closed up 3.94% at $24.29 on Tuesday.
| Banking Sector
In $millions |
Tkr | SI 6/30
(Shrs) |
SI 9/19
(Shrs) |
Change in
Notional |
% Change
Notional |
| Deutsche Bank | DB | 22.3 | 40.8 | +$277.8 | +69.9% |
| Goldman Sachs | GS | 4.5 | 6.6 | +$510.7 | +50.7% |
| Wells Fargo | WFC | 23.8 | 33.0 | +$439.3 | +33.3% |
| Citigroup | C | 21.5 | 24.8 | +$320.5 | +22.2% |
| JP Morgan | JPM | 25.9 | 30.1 | $455.0 | +19.2% |
| Credit Suisse | CS | 6.6 | 6.2 | +$.55 | +0.6% |
| Bank of Amer. | BAC | 113.2 | 107.2 | -$80.3 | -2.9% |
| Morgan Stanley | MS | 14.5 | 13.0 | -$28.4 | -4.4% |
| Leucadia | LUK | 3.0 | 2.2 | -$25.4 | -32.2% |
Despite the market seeing new High’s almost daily, short sellers have held onto these unprofitable positions. As of September 19th, S3 Analytics estimates that short sellers have lost more than $146 million since the end of 2Q. Should short sellers want to increase to these positions, there is a sufficient supply of stock that can be borrowed. All of these stocks trade at “GC Levels”, the cheapest financing level available.
As Q3 approaches a close, the market will see if the Wall Street banks can depend on robust Investment Banking conditions, to stem the expected shortfalls coming from trading.
Want deeper insight into the above analysis?
Contact: Ihor.Dusaniwsky@S3Partners.net
Director, S3 Partners
For more information on S3’s reporting, data and analytics solutions, email us at sales@s3partners.net
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The information herein (some of which has been obtained from third party sources without verification) is believed by S3 Partners, LLC (“S3 Partners”) to be reliable and accurate. Neither S3 Partners nor any of its affiliates makes any representation as to the accuracy or completeness of the information herein or accepts liability arising from its use. Prior to making any decisions based on the information herein, you should determine, without reliance upon S3 Partners, the economic risks and merits, as well as the legal, tax, accounting and investment consequences, of such decisions.
