SocGen closes long/short banks basket after profit

PARIS (Reuters) - Societe Generale has closed a long/short basket on banking stocks, not because of moves by regulators to ban short trading, but after Thursday's takeover of HBOS HBOS.L by Lloyds (LLOY.L), SocGen said on Friday.

SocGen strategists said they started the long/short strategy on May 22. The "bull basket" consisted of BNP Paribas (BNPP.PA), Santander (SAN.MC), UniCredit (CRDI.MI) and Barclays (BARC.L), while the "bear basket" comprised Lloyds, HBOS, Credit Agricole (CAGR.PA) and Deutsche Bank (DBKGn.DE), they said.

"Following yesterday's M&A announcement, which affects our bear basket, we elect to close our Long/Short strategy after 15.9 percent performance since inception. This compares to our benchmark index, the DJ Stoxx 600 .STOXX, falling by 20.5 percent over the same period," the strategists wrote in a note.

Regulators unveiled rules late on Thursday and on Friday to prevent investors profiting from falling financial stocks, helping trigger a strong recovery in banking stocks that had been hammered by fears over the credit crisis.

Short-selling involves selling stock in anticipation the price will fall -- in which case the investor can buy the stock back at a lower price. Short sellers argue that the practice is a good way to generate profits in a downward market.

Lloyds TSB (LLOY.L) sealed a 12.2 billion pound deal to buy HBOS HBOS.L on Thursday.

(Reporting by Blaise Robinson; Editing by Quentin Bryar)