The Big Short in Canadian Banks

Reviewing history, the Big 5 Canadian banks actually don’t have a high short interest, except for CIBC. The Big 5 Canadian banks are some of the most profitable businesses on the Toronto Stock Exchange.

For long-term investors who are looking for stable dividends and stable growth, it does not make sense to sell your stakes in the banks, unless you have a huge allocation, own a large stake in CIBC, or are worried about the health of the housing market in Canada. You’ve got to hold the stock to get the dividends!

We believe there’s a higher probability of slower growth or stagnant growth in the housing market than a meltdown.

Should You Sell Your Big Canadian Bank Shares?

Should you sell your bank shares? The short answer is “no” unless you own CIBC stock and are worried about the health of the housing market. Royal Bank has the least short interest, which indicates investors are finding it to be the safest bank perhaps because the bank is the leader and largest among the Big 5 and also has a focus on high net worth clients.

Here’s a longer answer to the question. Ultimately, investors should answer these questions for themselves and then make a decision on whether to buy/hold/sell accordingly:

  • Why did you buy the big banks in the first place? What’s your goal?
  • What’s your allocation in the Canadian banks or each bank?
  • What’s your investment horizon?

Here’s our answer with regards to our situation:

Unfortunately, we have maxed the word limit for this excerpt. But you can read the full Seeking Alpha article here: Higher Short Interest In Canadian Banks? Should You Get Out Of Your Big Bank Longs?

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Disclosure: As of writing, we’re not long in any stocks mentioned.

Disclaimer: I am not a certified financial advisor. This article is for educational purposes, so consult a financial advisor and or tax professional if necessary before making any investment decisions.

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