Warren Buffett, the billionaire investor and CEO of Berkshire Hathaway, has a complicated history with banks. He has been both a rescuer and an investor in the banking industry for over five decades. However, during the COVID-19 pandemic, he sold off a significant portion of Berkshire's holdings in US banks, including giant stakes in JPMorgan Chase, Wells Fargo, and Goldman Sachs, and reduced its ownership in regional lenders US Bancorp and Bank of New York Mellon.
Buffett has said little on the subject this year, beyond acknowledging in a recent CNBC interview that he reduced his exposure to the banking industry amid concerns that it could run into a lot of "trouble." He cited the banking system's punishment of culprits as a key area of concern, stating that "It's incredibly important that your banking system run well."
Despite selling off some bank holdings, Berkshire Hathaway still has sizable holdings in giants Bank of America and Citigroup, as well as a smaller piece of online bank Ally Financial. However, the value of Berkshire's Bank of America stake declined by $4.7 billion during the first quarter of 2023, to $29.5 billion.
Buffett's connection to the banking industry deepened in 2008, when he played a key role in restoring confidence in banks during the worst financial crisis since the Great Depression. Goldman Sachs came to him seeking capital, along with his stamp of approval. Buffett injected $5 billion into Goldman.
It was also Buffett who suggested in 2008 to then-Treasury Secretary Hank Paulson that the federal government should inject capital into banks to stabilize the industry. That became an official proposal of $250 billion, even though some of the biggest banks insisted they didn't need the money.
Buffett played the role of rescuer again in 2011 when he injected $5 billion into Bank of America. At the time, Brian Moynihan was still a relatively new chief executive, and the lender's shares were under severe pressure due to losses from subprime loans.
Buffett's specific thoughts on the banking system will likely be front and center at the Berkshire Hathaway annual meeting, an annual Omaha, Nebraska extravaganza that attracts tens of thousands of Buffett followers from around the country. The highlight of the event is a wide-ranging question-and-answer session with Buffett on Saturday.
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