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- Warren Buffett’s Berkshire Hathaway has cut its Wells Fargo stake to its smallest size in 17 years.
- The billionaire investor’s conglomerate said on Friday that it owns 3.3% of the company, its slimmest ownership position since 2003.
- Berkshire owned 13.3% of the bank in 1994, and held more than 500 million shares worth more than $27 billion in 2016.
- Buffett’s company now holds fewer than 140 million shares, worth about $3.4 billion as of Friday’s close.
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Warren Buffett’s Berkshire Hathaway has slashed its Wells Fargo stake to its lowest level in 17 years.
The famed investor’s company revealed on Friday that it has cut its holdings to 136 million shares, representing 3.3% of the outstanding shares in America’s third-largest bank. The last time it owned a percentage stake that small was 2003, according to Buffett’s shareholder letter that year.
Berkshire has been a Wells Fargo shareholder for more than 30 years, counting the bank among its five biggest holdings for most of that time. It paid less than $290 million between 1989 and 1990 to establish a 9.7% stake in the bank, which it grew as high as 13.3% in 1994.
The position peaked in value at over $27 billion in 2016, when Berkshire owned more than 500 million shares, giving it a 10% stake in the bank at the time.
Berkshire steadily trimmed its Wells Fargo holdings over the next three years, then slashed them by more than 60% this year. Its remaining shares were worth about $3.4 billion as of Friday's close, reflecting Berkshire's reduced stake and the 54% slump in the bank's stock price this year.
Buffett may be cutting his exposure to Wells Fargo because of the reputational damage caused by its fake-accounts scandal and the lending limits imposed on it by federal regulators in 2018, David Kass, a finance professor at the University of Maryland, told Business Insider last month.
The billionaire investor may also be bearish on the bank's medium-term prospects. The coronavirus pandemic continues to hammer the US economy, spurring the Federal Reserve to signal it will keep interest rates close to zero for a while.
Wells Fargo has also followed its peers in setting aside funds to cover a likely surge in loan defaults. The bank took a $13.5 billion credit-loss provision in the first half of this year, fueling a net loss of $2.4 billion — a sharp swing from $12.1 billion in net income for the first six months of 2019.