Short Sellers Lose $64M on One Regional Bank Stock Amid Turmoil

Short sellers targeting shares of New York Community Bancorp have incurred approximately $64 million in unrealized losses in 2020, as per data from S3 Partners LLC. This figure represents the largest mark-to-market loss for short sellers of US regional banks, and the only short position not generating profits exceeding $5 million. Consequently, in contrast, traders who shorted other regional banks have amassed nearly $7 billion in unrealized gains year-to-date. The primary reason for the decline of NYCB short sellers is due to the stock’s increase of almost 10% this year – an aspect that is contrary to the broader trend of regional banks. Specifically, the KBW Regional Banking Index has experienced a massive decline of 31% during the same period resulting from multiple bank failures, including Silicon Valley Bank’s collapse in March.

NYCB, based in Hicksville, New York, has surprisingly emerged as a winner amidst the banking chaos. On March 20, the bank’s shares jumped an unprecedented 32% after it announced its decision to assume some of Signature Bank’s deposits and loans. According to NYCB’s recent earnings report, this acquisition is expected to enhance the bank’s net interest margin, a critical gauge of profitability. However, it would be remiss not to acknowledge that the bank has not been entirely immune to the regional banking crisis. As concerns regarding the safety of other banks resurface and First Republic Bank fails, NYCB’s shares are projected to decline by 11% this week.