John Paulson's Hedge Fund Makes A Killing Shorting Royal Bank of Scotland (RBS)

John Paulson's hedge fund, Paulson & Co., made at least $420 million since September by shorting Royal Bank of Scotland Group Plc (NYSE: RBS).

Bloomberg reported Paulson had a short position of 0.87% in RBS on September 19. The shares traded at 213.5 pence at the time, and Paulson’s disclosure indicates his firm borrowed and sold almost 144 million RBS shares with plans to buy them back at a lower price. He reduced his short position to less than 0.25%, or about 98.6 million shares, as of January 23rd.

Paulson would have made $416 million, assuming it still had a 0.25% short position on January 23rd, when RBS closed at 12.1 pence.

Paulson still has bets on continued declines for Lloyds Banking Group Plc (NYSE: LYG) and Barclays Plc (NYSE: BCS), both the banks rallied this week and regained some of their losses since last year.

The Financial Services Authority, Britain’s market regulator, removed a short-selling ban on financial companies including RBS and Barclays on January 16.

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