Magazine article American Banker

BankBoston, Wells, Sovereign Foil the Short-Sellers

Magazine article American Banker

BankBoston, Wells, Sovereign Foil the Short-Sellers

Article excerpt

By TALLEY, KAREN Short-sellers reduced their bets against big banking companies after fourth-quarter earnings reports failed to reveal the bad news the cynical investors had expected. Short interest in bank-related stocks slipped 6.2% in the month ending Feb. 15, and dropped significantly in BankBoston, Sovereign Bancorp, and Wells Fargo shares, according to the New York and American stock exchanges. Short-sellers borrow stock, hoping its price will decline, enabling them to profit when they replace the shares. Investors had taken short positions in BankBoston, in anticipation that troubles in Latin American operations would show up in fourth-quarter results. During that monthlong period there was a 40.1% decline in BankBoston shares that were borrowed in anticipation that they were going to fall, to 1.5 million. This "probably had a lot to do with when earnings came out," said Stephen Biggar, a banking analyst with S&P Equity Group. "There was some relief that they handled the Latin American earnings so well." BankBoston "did a great job" insulating itself from volatility in the region, Mr. Biggar said. Nonetheless, Mr. Biggar rates BankBoston's shares a "hold," saying its earnings are only average for the banking sector. Short interest in Wells Fargo & Co. declined by 33%, to just under 14 million shares. Short-sellers had thought the bank, which resulted from the merger in the fall between Norwest Corp. and Wells, would have trouble wringing the expected cost savings from the deal, said Sharada Krishnappa, a banking analyst at Parker/Hunter Inc. Wells Fargo & Co. is "a long-term buy story for us," Ms. Krishnappa said. "The merger seems to be coming together rather well. The old Norwest had a very good marketing strategy of having 3.8 relationships with each customer." The new company is trying to increase that ratio and at the same time tap into Wells Fargo customers, analysts say. …

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