- CNBC just reported that the big 8 banks in the U.S are going to be suspending share buybacks.
- BAC, BNY, C, GS, JPM, MS, State Street & WFC are the banks that have suspended buybacks.
- CNBC link here
This begs a few questions:
- What happened to the capital cushion and Fort Knox balance sheet everyone was talking about? Probably, the move is to conserve cash.
- Were they asked to suspend buybacks from someone else?
- All the banks had record buybacks in 2019 when the stock prices were up and suspending when the stock prices are down. A classic strategy of buy high and sell low.
- Is the coordinated function to prevent weaker banks from being targetted during this time?
- If the banks are doing this at this point, coupled with the Fed’s decision to go down to zero, the underlying business must have cracked. They must seeing signs of distress everywhere.
We all know that Warren Buffett and Berkshire Hathaway have been bullish on banks in America. It looks like the fest is all set to continue. Berkshire Hathaway just filed a Form 3 with the SEC as a 10% owner of Bank of America (BAC). You can find the filing here
It looks like Berkshire has added over 54 Million shares in BAC since April 2019. What is even more interesting is that Warren Buffett and Berkshire have been actively selling down Wells Fargo every quarter for the last few years to keep its ownership interest below 10% (here) as it hampers their ability to do business with the bank (here)
It also looks like it is okay to own up to 25% of a bank as long the investor gets a permission from the federal reserve and assures them that they would remain a passive investor.
Whichever way you look at it, between WFC, BAC and the growing stake a JPM, Warren Buffett is owning a huge piece of the American banking system. And his actions are the strongest indicators on how Berkshire feels about the current valuation of American banks and areas where large amounts of capital can be deployed for Berkshire.