Santander Shorts Near Four-Year Lows With Cost to Borrow Surging

Banco Santander heads into its 28 October earnings release with a borrow market that has moved sharply against the bears, even as the stock has continued to fall.

Short sellers have trimmed exposure since mid-September. Shares short peaked above 53 million in mid-September and have since fallen to 46.5 million, the lowest level since early 2022 after a monthly decline of around 8%. That said, the past week reversed part of the trend: short shares rose nearly 7% over the five sessions to 22 October, adding about 3 million shares back into the position after a brief retreat below 44 million.

The more striking development is in borrowing costs. Cost to borrow has tripled in a week, reaching 3.06% on 22 October from 0.80% on 16 October. A month ago it was below 0.55%. Borrow availability remains loose in absolute terms, at 610% of current short interest, meaning there are roughly six shares available for every one already borrowed. But the direction is unmistakable: availability has tightened by a third over the past week, down from above 1,000% as recently as 16 October. The tightest the borrow market has been in the past 52 weeks was 27.5% availability, so there is distance before a genuine squeeze, but the speed of the move warrants attention.

Jefferies cut the stock to Hold from Buy on 20 October, its first downgrade in over four years. That note landed with the stock at $13.02. The ADR has since slipped further to $12.84, down 3.5% over the past week and 11.4% over the past month. The previous constructive calls from Citigroup (Buy reinstated June 2025) and Barclays (Overweight upgrade March 2024) now sit on a stock that is meaningfully below where those ratings were placed. Options positioning has not turned overtly defensive: the put/call ratio of 0.46 is only slightly above its 20-day average of 0.44, well below the 52-week high of 0.81, suggesting the options market is not pricing in a dramatic downside move.

The ORTEX short score has drifted higher over the past ten days, reaching 37.97 on 22 October from 32.85 at the start of the period. That is still a moderate reading, reflecting the reduced short position rather than an extreme bearish setup. The earnings report four days from now will test whether the deterioration in Santander's October price action reflects something durable in the business or simply a market re-rating of European bank valuations at a time when rate expectations are shifting.