TD Bank is now the world’s most-shorted lender: here’s why

Toronto-Dominion Bank (TSE: TD) is in focus today after the Canadian lender became the most-shorted bank in the world.

Why are shorts betting against TD Bank

Data from S3 Partners on Wednesday confirmed that short bets against the financial services behemoth are now worth a whopping $3.7 billion.  

Part of it is related to the broader anxiety following the recent bank failures. But Mark Sebastian – the Founder of Option Pit sees a few specific issues at play as well.

Toronto-Dominion currently has about a 12% stake in the Westlake-headquartered financial services company.

Sebastian sees big value in community banks

Shares of TD Bank are down roughly 15% versus their year-to-date high at writing.

Sebastian agrees that it’s a good bank but recommends that investors be cautious considering the options market is suggesting strongly bearish sentiment in “KRE” – the Regional Banks ETF. A better investment, he revealed in an interview with BNN Bloomberg today, was community banks.

Two bank stocks that Sebastian finds interesting in particular include the Fifth Third Bancorp and Comerica Incorporated. He hasn’t loaded up on shares of either yet, though, he confirmed.