- Warren Buffett may have reduced his holdings in Wells Fargo because the bank’s board went against his advice and hired a Wall Street boss as the new CEO, Bloomberg said.
- Renowned Berkshire investor and CEO Hathaway told the Financial Times last year that Wells Fargo should hire someone from outside Wall Street or risk angering Congress. “It’s just not smart,” he says.
- Buffett’s company has held shares in the bank for more than 30 years, but it has reduced its position by more than 60% this year to its lowest level in 17 years.
- Investors will learn next month whether Berkshire has completely exited the position.
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Warren Buffett may have reduced his stake in Wells Fargo to its lowest level in 17 years this year because the bank’s directors ignored his advice and hired a Wall Street executive as a new CEO, according to Bloomberg.
Billionaire investor and CEO of Berkshire Hathaway told the Financial Times last year that Wells Fargo, still reeling from its fake accounts scandal, risk angering regulators if it hires its next boss at JPMorgan , Goldman Sachs or some other big bank.
“They just have to come from one place [outside Wells] and they shouldn’t be from Wall Street, ”Buffett said.
“There are plenty of good people to lead it [from the Wall Street banks], but they’re automatically going to draw the ire of a significant percentage of the US Senate and House of Representatives, and that’s just not smart, ”he added.
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However, Wells Fargo went against the advice of its largest shareholder and appointed Charles Scharf, who worked at JPMorgan before leading Visa and later BNY Mellon, in September last year. He also agreed to let his new managing director run the California bank from New York.
“This is outrageous,” Charlie Munger, Buffett’s right-hand man and Berkshire vice president, said of the work arrangement in an interview with Bloomberg earlier this year.
Berkshire has been a Wells Fargo shareholder for over 30 years, counting the bank among its top five holdings for most of that time. It owned over 13% of the bank in 1994 and had over 500 million shares worth over $ 27 billion in 2016.
However, it reduced its position by over 60% this year to less than 140 million shares, giving it a roughly 3.3% position in the bank – its smallest percentage stake since 2003.
Buffett’s company may have left Wells Fargo entirely in the last quarter. Investors will know when Berkshire’s September 30 holdings are released in mid-November.
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Berkshire sold a bunch of financial stocks in the second quarter, including JPMorgan and Goldman Sachs. Wells Fargo also remains subject to a regulatory cap on its assets. The bank recorded a rare quarterly loss and cut its dividend this year, providing several alternative reasons why Berkshire may have reduced its position.
On the other hand, Buffett’s company invested $ 2.1 billion in shares of Bank of America over 12 consecutive trading days in the last quarter, which suggests that it is not bearish on the entire banking sector.