LONDON, March 18 (Reuters) - Hedge funds piled into bank

and financials stocks at the fastest pace in a year, Goldman

Sachs ( GS ) said in a note, just in time to catch highs seen European

and U.S. banking indices.

Financial stocks in North America, Europe, and

emerging-market Asia were among the most sought-after stock

sectors for the second week running last week, according to the

note tracking hedge fund trades for the week ending Friday.

The STOXX Europe 600 banks index (.SX7P) has risen by 8.3%

so far this year and is now around its highest since 2019.

The Dow Jones banking index has risen by 6.6%

since the start of the year.

Hedge funds took long positions in banks and capital markets

companies, ditching short bets. Consumer finance firms saw hedge

funds add long positions. A short reflects an expectation that

an asset price will fall.

Hedge funds were still net short insurance companies, the

note said.

Bank stocks dropped sharply in March last year after the

failure of U.S. regional lender Silicon Valley Bank. In that

month, Deutsche Bank shares lost more than a fifth of their

value and the European banking index logged its worst monthly

performance since the pandemic.

Share prices in European and U.S. banks have since rocketed,

led by a 60% gain for UBS and nearly 70% for UniCredit

and Deutsche Bank.

The Goldman Sachs ( GS ) prime brokerage desk, which serves hedge

funds, says their clients are long, but hold very few positions

in financial companies relative to other global stocks.