March 4 (Reuters) – Short sellers targeting a key regional U.S. bank exchange-traded fund have made $977 million on paper so far in 2024, data from analytics firm Ortex showed, as troubles at New York Community Bancorp (NYCB.N), opens new tab rippled across the industry.
The fallout from NYCB’s exposure to the troubled commercial real estate (CRE) market has made many investors jittery about the health of the sector.
“I think it (CRE exposure) is going to affect a lot more banks, whether or not they have underwritten properly,” said Robert Riva, member of real estate department at corporate law firm Cole Schotz.
“This is not something that’s localized to someone who’s maybe repeating the mistakes of Lehman Brothers, just 15 years later. It’s an industry-wide problem.”
The SPDR S&P Regional Banking ETF (KRE.P), opens new tab has dropped 9.2% this year, benefiting short sellers, who sell borrowed securities and aim to buy them back at lower prices.
ETFs track stocks, commodities, bonds or a basket of assets like an index fund.
Those betting against the Invesco KBW Regional Banking ETF (KBWR.O), opens new tab, another ETF tied to the industry, are sitting on $663 million of paper profits.
Bank of Hawaii Corp (BOH.N), opens new tab, Axos Financial (AX.N), opens new tab and Columbia Financial (CLBK.O), opens new tab were the top targets for short sellers across the two ETFs, Ortex data showed.
Short interest for the three, as a percentage of their free float, stood at 15.98%, 11.73% and 9.38%, respectively, as of March 1.
