Warren Buffett's Berkshire Hathaway is now the biggest owner of two of the world's largest banks: Bank of America and Wells Fargo.
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Warren Buffett is now the largest owner of 2 of the world's biggest banks (BAC, JPM, WFC, GS)
The Federal Reserve cleared the way for Buffett to become Bank of America's largest shareholder.
Warren Buffett.
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On Wednesday, the Federal Reserve cleared the way for Buffett to become Bank of America's largest shareholder.
It passed all the big banks on their so-called stress tests, giving them permission to use their capital for things beyond buffering against disaster, including share buybacks and dividend payments.
Bank of America raised its dividend to $0.12 a common share.
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That made it compelling for Berkshire to convert its preferred shares into common stock, giving it shareholder ownership, and earning as much as $12 billion in profit. Berkshire announced on Friday that it would exercise its warrants to buy 700 million common shares of Bank of America, the third-largest US bank by market cap, instead of waiting until just before their expiry in 2021.
In a statement, the bank said it welcomed Buffett's decision.
With $2.19 trillion in assets, Bank of America ranked ninth in the world, according to an S&P Global Market Intelligence ranking released in April.
Buffett's initial investment in the bank dating back to 2011 was a thumbs-up of sorts to CEO Brian Moynihan, who had recently taken the helm. It was also a bet that the bank would recover from the fallout of toxic mortgage securities.
He acquired $5 billion of Bank of America preferred stock with a 6% dividend, or $300 million annually, in August 2011, at a time when investors worried about the bank's capital needs, Reuters reported.
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The conglomerate said last July that it owned more than 10% of Wells Fargo, which on Friday amounted to nearly 537 million shares, according to Bloomberg. It's the second-largest bank in the US by market capitalization and was the 10th largest in the world by assets, according to S&P.
Berkshire Hathaway also owns smaller stakes in Goldman Sachs and JPMorgan.
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