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

on Apr 5, 2023
  • Short bets against TD Bank are now worth a whopping $3.7 billion.
  • Option Pit's Mark Sebastian explains why on BNN Bloomberg.
  • TD Bank stock is currently down 15% versus its year-to-date high.

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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

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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.

It’s in the middle of buying First Horizon. That’s creating some of this. It also is intertwined with Charles Schwab. SCHW is a trail of sadness, going straight down since this banking crisis began.

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

Sebastian sees big value in community banks

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

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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.

I think if you go one level down, there’s big value in community banking here in the United States. They are the most conservative investors on the planet.

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.


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