WFC Wells Fargo and Company

By Ben Eisen 

Warren Buffett's Berkshire Hathaway Inc. unloaded billions of dollars of bank stocks as the U.S. economy reeled during the coronavirus lockdown.

Berkshire's holdings of Wells Fargo & Co. and JPMorgan Chase & Co. stock dropped by more than $3 billion apiece in the second quarter, according to regulatory filings made public Friday. The company also dissolved its stake in Goldman Sachs Group Inc., which was worth $300 million at the end of the first quarter.

The conglomerate has simultaneously been adding to its ownership of Bank of America Corp. in recent weeks and now owns roughly 12% of the company, according to FactSet.

Bank stocks have taken a big hit this year as the largest set aside tens of billions of dollars to account for potential loan losses. Bank executives have said they believe the current recession will now be deeper and longer than initially expected. The KBW Nasdaq Bank Index has fallen 31% this year.

Mr. Buffett has expressed optimism about a recovery in the U.S. economy, but warned in May that stocks can be unpredictable.

"You can bet on America, but you are going to have to be careful on how you bet. Simply because markets can do anything," he said.

Berkshire's sales amount to a 26% drop in its shareholdings of Wells Fargo. His JPMorgan stake is down by 62%. He also sold shares of Bank of New York Mellon Corp., M&T Bank Corp., and PNC Financial Services Group Inc., among others.

The sale of Wells Fargo shares is particularly notable because it likely means Berkshire is no longer the biggest shareholder. Mr. Buffett first bought shares in 1989 and stood by Wells Fargo as its sales-practice scandal unfolded, sometimes receiving criticism for it.

"All the big banks have had troubles of one sort or another," Mr. Buffett said at Berkshire's annual meeting in 2018. "And I see no reason why Wells Fargo as a company, from both an investor standpoint and a moral standpoint going forward, is in any way inferior to the other big banks with which it competes."

At the end of last year, Berkshire's 8.4% ownership stake was worth $18.6 billion, for which the company paid $7 billion, the company said in its annual letter. But the stock has fallen by more than half since then, hit by the economic collapse stemming from the pandemic, the bank's first quarterly loss since the financial crisis and its decision to slash its dividend.

That has reduced Berkshire's paper profits -- and the tax bill that would come from any sale.

Mr. Buffett, however, is betting big on Bank of America. Berkshire didn't buy shares in the second quarter, but in recent weeks disclosed additional purchases, lifting its holdings of the bank above the 10% threshold Mr. Buffett has said he typically tops out at.

Bank of America shares have risen 9.7% over the last month, but remain down by almost a quarter in 2020.

Berkshire first invested in Bank of America in 2011, buying $5 billion in preferred shares when the lender was struggling after the financial crisis. Berkshire also received warrants to buy common shares, which it exercised in 2017 to become the bank's largest shareholder.

Mr. Moynihan said in a recent television interview that Mr. Buffett first reached out to invest in the bank by dialing its call center and asking to speak with the CEO. The two talk periodically, Mr. Moynihan said in a recent interview with Time.

--Nicole Friedman contributed to this article.

Write to Ben Eisen at ben.eisen@wsj.com

(END) Dow Jones Newswires

August 14, 2020 17:22 ET (21:22 GMT)

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