The most important person in the bank industry isn't a banker -- it's Warren Buffett, the chairman and CEO of Berkshire Hathaway (BRK.A 0.64%) (BRK.B 0.54%).
He cemented that role this week by exercising warrants Berkshire Hathaway held to buy 700 million shares of Bank of America (BAC 1.53%). Berkshire is now the biggest shareholder of the nation's second-largest bank by assets.
Data source: Nasdaq. Chart by author.
An ownership stake in such a large bank is notable in and of itself, yet it's only one of many banks in which Berkshire Hathaway is a leading shareholder.
Since the early 1990s, the Omaha, Nebraska-based conglomerate has also been the biggest shareholder in Wells Fargo (WFC 2.73%), the nation's third-biggest bank by assets.
Data source: Nasdaq. Chart by author.
Berkshire also has major positions in M&T Bank, U.S. Bancorp, Bank of New York Mellon, and American Express.
|
Bank Stocks Owned by Berkshire Hathaway |
Number of Shares Owned |
Holding Value |
|---|---|---|
|
Wells Fargo |
468 million |
$23.8 billion |
|
Bank of America |
700 million |
$16.7 billion |
|
American Express |
151.6 million |
$13.0 billion |
|
U.S. Bancorp |
85.1 million |
$4.4 billion |
|
Bank of New York Mellon |
50.2 million |
$2.6 billion |
|
Goldman Sachs |
10.9 million |
$2.5 billion |
|
M&T Bank |
5.4 million |
$798 million |
Data source: CNBC's Berkshire Hathaway Portfolio Tracker.
And his role doesn't stop there. During the depths of the financial crisis, Buffett injected $5 billion worth of Berkshire Hathaway's capital into Goldman Sachs, giving the Wall Street investment bank a much-needed confidence boost just as its competitors were failing or being rescued by larger institutions.
Moreover, while Berkshire Hathaway doesn't have a position in JPMorgan Chase (JPM 0.65%), the nation's largest bank by assets, Buffett has admitted in the past that he personally owns shares of the bank and holds its chairman and CEO, Jamie Dimon, in high regard. Buffett went so far as to tell CNBC at one point that Dimon "writes the best annual letter in corporate America." Lest there be any doubt on the latter point, I encourage you to read about Dimon's 2006 shareholder letter.
Jamie Dimon, the chairman and CEO of JPMorgan Chase. Image source: JPMorgan Chase.
It's worth noting as well that one of Buffett's lieutenants recently became a member of JPMorgan Chase's board of directors. Todd Combs, an investment officer at Berkshire Hathaway, became a director of the bank last year.
"Todd Combs is an extraordinary leader, investor and thinker, with a deep understanding of finance and business," said Dimon at the time. "We're pleased he has agreed to serve on our Board of Directors, and our company and our Board will benefit from his wisdom and judgment."
Warren Buffett, the chairman and CEO of Berkshire Hathaway. Image source: The Motley Fool.
What is it about banking that is so appealing to Buffett? In the first case, it exhibits similar dynamics to insurance, as both industries are in the business of managing risk. And in the second case, success in both industries is predicated on maintaining discipline through the ups and downs of the business cycle, which is among Buffett's most prominent strengths.
Consequently, if you're interested in learning about the proper and prudent approach to operating or investing in a bank, then it's worth spending time reading through Buffett's annual letters to the shareholders of Berkshire Hathaway. Intermixed with his folksy wisdom on investing are timeless lessons about identifying the best-run banks in the country.
