Short sellers increased bets against regional banks last week even as the sector notched one of its best performances in a year.

Traders added $2.1 billion to short positions in regional banks for the five-day week ending May 19, a net increase of about $2 billion from a week earlier, according to data from S3 Partners LLC. Meanwhile, the SPDR S&P Regional Banking ETF rose 7.8% in the same period, its best weekly performance in a year, leading short sellers to $1.1 billion in paper losses.

Read more: Regional Bank Stocks Notch Strongest Weekly Gain in a Year

Even as the sector takes a breather, short sellers continue to pile into trades against regional banks like Zions Bancorp and Truist Financial Corp. because of the ongoing uncertainty.

“We expect bank stocks to remain pressured and choppy with the continuing crisis and also due to the regulatory and economic uncertainty despite low valuations,” said JPMorgan analyst Vivek Juneja in a Monday note.

Last week, short sellers added about $205 million in short interest to positions of M&T Bank, the largest increase during the period. Western Alliance also topped the list of banks that traders boosted bets against despite reporting deposit growth and offering some relief to investors concerned about the health of lenders.

On Monday, PacWest Bancorp jumped as much as 25% when it said it would sell a $2.6 billion portfolio of real estate loans to boost its liquidity. Both the S&P ETF and the KBW Regional Banking Index continued to climb, up about 2.8% and 2.7%, respectively.

The gains, however, do little to offset massive losses in the sector this year. The S&P Regional Banking Index has shed roughly 32% in 2023, weighed down by the failures of SVB and Signature in March and First Republic Bank this month.

So far this year, the traders have mark-to-market profits of $6.8 billion thanks to bets that regional bank stocks will continue to fall.

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