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Paulson & Co. Makes Billion Dollar Bet Against UK Banks (BCS, RBS, LYG)

September 24, 2008 12:22 PM EDT
Adhering to a new regulatory regime, John Paulson's Paulson & Co., yesterday disclosed short positions in four of the five largest British banks. The bet now makes Paulson the largest short seller of UK banks.

According to the filing, Paulson's hedge fund has taken a $650 million bet against shares of Barclays (NYSE: BCS), a $542 million bet against Royal Bank of Scotland (NYSE: RBS) and a $483 million bet against Lloyds TSB (NYSE: LYG). Despite the massive short positions, Paulson said his firm "'empathizes' with the tough position facing financial companies." Hmm...

Paulson seems to be betting that a similar situation which has left Wall Street with a few less investment banks will hit the UK next. As Paulson has been dead-on with his calls over the last year or two, it will be interesting to see how many other funds jump into the downside play on Barclays or Lloyds.

Investors seem to be mixed on the disclosure of the short positions. Shares of Barclays are down 3.5% and shares of Lloyds are currently down more than 5%, while shares of Royal Bank of Scotland are up 3%.

Barclays PLC engages in the provision of financial services worldwide. It offers retail and commercial banking, credit cards, investment banking, wealth management, and investment management services.

The Royal Bank of Scotland Group plc is a holding company of The Royal Bank of Scotland plc and National Westminster Bank Plc, which are United Kingdom-based clearing banks.

Lloyds TSB Group plc, through its subsidiaries, provides various financial services to personal and corporate customers in the United Kingdom and internationally.

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