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Michael Burry of ‘The Big Short’ gambles on regional bank stocks

Michael Burry, who famously shorted subprime mortgages during the 2008 financial crisis, is making a big new bet on regional banks.

His hedge fund Scion Asset Management loaded up on $23.4 million worth of bank stocks in the first quarter, according to filings. The positions include some of the same mid-sized institutions that came under intense investor pressure following the March failures of Silicon Valley Bank and Signature Bank.

Scion's new holdings include $7.6 million in shares of New York Community Bank (NYCB), which purchased loans and assumed deposits from Signature, as well as $4.4 million in Western Alliance (WAL), $2.4 million in PacWest (PACW) and $2 million in San Francisco lender First Republic.

He also purchased $2 million of Huntington Bank (HBAN), a regional lender in Columbus, Ohio.

Not all of his buys were regionals. Scion also picked up $4.6 million in industry giant Wells Fargo (WFC).

One of the banks he bet on now has a new owner. Regulators seized First Republic on May 1, wiping out its shareholders, and sold the bulk of its operations to JPMorgan Chase (JPM).

Two others, Western Alliance and PacWest, have been struggling to assure investors that the worst of the regional banking crisis is behind them.

But Scion's bank stocks rose Monday on a new wave of optimism about their prospects. Western Alliance and PacWest closed the trading day up 12% and 17%. Year to date, those banks have fallen 48% and 76%, respectively.

NEW YORK, NY - NOVEMBER 23:  Michael Burry  attends
Michael Burry at a 2015 screening for "The Big Short." (Photo by Astrid Stawiarz/Getty Images) (Astrid Stawiarz via Getty Images)

Burry gained fame for his moves during the 2008 crisis, a severe downturn that began with a US housing bust. Burry predicted a collapse in residential real estate prices as early as 2007 and then shorted a number of subprime deals through the use of credit default swaps.

He became a central figure in Michael Lewis’s 2010 book “The Big Short,” and Christian Bale later portrayed Burry in a 2015 film adaptation of the Lewis book.

Scion, his firm, did not immediately respond to requests for comment on the investments.

Not all large investors piled into banks during the chaos of the first quarter.

The family office of billionaire George Soros reduced its position in Memphis-based regional lender First Horizon (FHN) by 38% and sold off all its Citigroup (C) holdings while closing a $1.7 million short position on crypto-friendly bank Silvergate Capital, which said in March that it would wind itself down voluntarily.

The Soros Fund did take smaller call options on Charles Schwab (SCHW) and UBS Group AG (UBS).

Billionaire investor George Soros speaks to the audience at the Schumpeter Award in Vienna, Austria June 21, 2019. REUTERS/Lisi Niesner
Billionaire investor George Soros speaking in 2019. REUTERS/Lisi Niesner (Lisi Niesner / reuters)

The world’s biggest hedge fund, Bridgewater Associates, sold about $180 million in bank stocks. It zeroed out positions in 15 US lenders, including Bank of America (BAC), Western Alliance, Zions (ZION), PacWest and New York Community Bank.

Quantitative trading pioneer Renaissance Technologies was another big seller. It unloaded more than $400 million in US banking-related stocks, eliminating positions in 25 different banks during the first quarter.

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