Not BofA or JPMorgan, THIS Canadian lender is now world's most shorted bank stock

The world's most shorted bank stock at the moment isn't from Switzerland or Silicon Valley, but from Canada. The North American country's second-largest bank, Toronto-Dominion Bank, has short sellers having bearish bets worth a whopping $3.7 billion against it. 

That’s the most among financial institutions globally and puts TD ahead of the likes of France’s BNP Paribas, JPMorgan, Bank of America Corp, Citigroup, reported Bloomberg. 

TD’s exposure to the country’s housing slowdown, as well as its ties to the US market through its stake in Charles Schwab Corp and a planned regional bank acquisition might be the reasons for the stock turning into a short sellers' darling. 

Meanwhile, some TD shareholders are urging the bank to ditch or renegotiate its $13.4-billion acquisition of US lender First Horizon as the regional banking crisis has unearthed unknown risks

Regional lenders in the US face a crisis of confidence after the collapse of Silicon Valley Bank and Signature Bank last month.

First Horizon shares are trading almost 30% below TD's offer price of $25 each, which points to the high risk to the deal closing. Since the acquisition was first announced, TD shares are down 11.1% vs 4.5% for the financials sector.

TD is obligated to go through with the transaction but would have to pay $25 million to First Horizon if regulators don't approve it, according to the contract. If TD does not proceed, First Horizon could sue for damages, and lawyers estimated it would cost hundreds of millions. That compares with TD's last reported quarterly profits of C$1.6 billion ($1.19 billion).

TD offered a 37% premium to buy First Horizon more than a year ago in a deal that would make TD the sixth-largest US bank, operating in 22 states.

Some short sellers also have targeted TD because of its roughly 10% stake in Charles Schwab, which recently lost $47 billion in market value as it came under scrutiny over its unrealized bond losses.

Canada's top six banks control about 90% of banking operations in the country.

With inputs from agencies