Buffett, continue to sell bank stocks!
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发表于 2024-8-31 19:06:35
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Buffett has made another move.
On Friday, August 30th local time, the latest disclosure from the US Securities and Exchange Commission (SEC) showed that Berkshire Hathaway sold about 21 million shares of Bank of America stock, cashing out $848 million. Since July, Berkshire Hathaway has cumulatively reduced its holdings of approximately $6.205 billion in Bank of America stocks.
Buffett sells Bank of America again
On August 30th local time, SEC documents showed that between August 28th and 30th, Berkshire Hathaway sold approximately 21 million shares of Bank of America stock, cashing out $848 million.
[align center] (Berkshire Hathaway's latest reduction in Bank of America stock file source: SEC)
After this reduction, Buffett's Berkshire Hathaway's shareholding in Bank of America's outstanding shares has dropped to 11.4%. According to relevant regulations, if the shareholding ratio exceeds 10%, the transaction needs to be disclosed within a few days; If the shareholding ratio does not exceed 10%, there is no need to disclose the trading situation as soon as possible. Usually, it may take several weeks to disclose in each quarterly report.
In July, Berkshire Hathaway made a significant reduction in its holdings of Bank of America stocks. Throughout mid July, the company sold approximately $3.825 billion worth of Bank of America stock.
In August, Berkshire Hathaway's divestment activities continued. From August 15th to 19th, the company sold approximately $550 million worth of Bank of America stock. Subsequently, from August 23rd to 27th, approximately 981.9 million US dollars worth of stocks were sold. In the latest sale announced this Friday, from August 28th to 30th, Berkshire Hathaway further sold approximately 21 million shares of Bank of America stock, cashing out approximately $848 million.
In summary, during the two months of July and August, Berkshire Hathaway had a total cash flow of approximately $6.205 billion.
Buffett, who is 94 years old, began investing in Bank of America by purchasing its preferred shares and warrants for $5 billion in 2011. His Berkshire Hathaway eventually became the largest shareholder of the bank and has maintained this position ever since. After the latest sale, Berkshire still holds 882.7 million shares of Bank of America stock, with a market value of $35.97 billion based on Friday's closing price.
Analysts believe that the combination of high inflation and high interest rates has been favorable for bank stocks in terms of historical profitability. However, Buffett's decision to sell his Bank of America shares at this time suggests that he does not endorse the inflation narrative, and the upcoming interest rate cut by the Federal Reserve may be one of Buffett's logic for reducing his holdings in Bank of America.
What is the outlook for Bank of America if the interest rate cut channel is opened?
After Warren Buffett's Berkshire Hathaway continues to reduce its long-term holdings in Bank of America, WSJ analysts believe that investors can consider taking the opportunity to buy.
According to the Chicago Mercantile Exchange's FedWatch tool, the probability of the Federal Reserve cutting interest rates by 25 basis points in September is 70%, and the probability of cutting interest rates by 50 basis points is 30%. When the Federal Reserve cuts interest rates, it will weaken the interest income of many banks. Once interest rates are cut, the interest income generated by loans priced at benchmark rates for banks will begin to decrease.
According to Bank of America's forecast, if the Federal Reserve cuts interest rates three times by 25 basis points each before the end of the year, Bank of America expects its net interest income in the fourth quarter to decrease by approximately $225 million compared to the second quarter.
However, WSJ analysts believe that there are some factors that can help Bank of America offset this adverse impact. Since last year, in the eyes of some investors, a large bond investment portfolio has been a pain point for Bank of America, but in the future, with interest rate cuts, this pain point will become a potential relative advantage. At that time, not only may these low yield old bonds appreciate, but the large amount of securities maturing every quarter will continue to provide a significant boost to next year's net interest income, as those funds will be redeployed at current yields after maturity.
According to Bank of America's forecast, the above factors, combined with the continued maturity of fixed rate loans such as car loans and home mortgages, will increase the bank's net interest income by approximately $300 million in the fourth quarter compared to the second quarter, thereby offsetting the negative impact of interest rate cuts. In addition, net interest income also faces several favorable factors that are poised to take off. Bank of America has stated in a report that the maturity of cash flow swap hedging designed to prevent interest rate declines may result in an increase in net interest income starting in the second half of next year.
According to analysts' expectations compiled by Visible Alpha, they expect Bank of America's net interest income to grow by at least 5% by 2025. In contrast, it is expected that the net interest income growth of large banks such as Citigroup, JPMorgan Chase, and Wells Fargo will be much smaller, and may even decline. Many analysts believe that compared to peers such as Citigroup and JPMorgan, Bank of America's investment banking revenue currently contributes relatively more to its total revenue. Therefore, if the expected interest rate cut helps stimulate more corporate activity, then Bank of America will be the biggest beneficiary.
It is worth mentioning that in the latest stress test conducted by the Federal Reserve in response to a severe economic downturn, Bank of America's estimated loan loss rate was 5.5%, far lower than the average estimated loan loss rate of 7.1% of the 31 large banks tested.
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声明：该文观点仅代表作者本人，本文不代表CandyLake.com立场，且不构成建议，请谨慎对待。
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