Bank of America has struggled to keep pace with its competitors following a strong fourth-quarter earnings report. This has prompted analysts to suggest that the lender’s largest investor, Warren Buffett’s Berkshire Hathaway, may be quietly divesting its shares once again. Since the quarterly report on January 16th, Bank of America’s stock has remained relatively stagnant.
This is in contrast to a 2% increase in the S&P 500 and a 4% rise in the SPDR S&P Bank ETF (KBE) during the same period. The lack of performance is particularly striking given that Bank of America reported results that exceeded expectations. This was driven by robust investment banking and interest income.
The bank’s fourth-quarter profit more than doubled to $6.67 billion, or 82 cents per share, compared to the previous year. Net interest income rose by 3% to $14.5 billion, surpassing estimates by approximately $170 million. Two analysts on Wall Street have suggested that the stock’s underperformance may be linked to ongoing selling pressure from Berkshire Hathaway.
Truist Securities analyst John McDonald questioned whether Buffett’s influence was affecting market sentiment. He noted that some investors are speculating about potential sales following substantial divestments in the latter half of 2024.
Buffett’s influence on Bank of America
Last year, Berkshire Hathaway began reducing its stake in Bank of America, which was once its second-largest holding after Apple. The ownership eventually fell below 10%, allowing it to bypass timely reporting of related transactions. Wolfe Research analyst Steven Chubak indicated that the recent trading patterns of Bank of America strongly suggest that sales have continued.
While Chubak believes it is premature to declare a definitive turnaround, he noted that investors appear increasingly comfortable navigating the technical pressures on the stock. He expressed optimism that the company’s valuation gap would close over time, though he acknowledged uncertainty regarding the timing. Investors will gain more clarity when the 13F report is filed with the Securities and Exchange Commission on February 14th.
This will reveal Berkshire Hathaway’s stock market holdings as of the end of 2024. Additionally, Buffett’s highly anticipated annual letter to shareholders, set for release later this month, may provide insights into his current views on the market and Bank of America. Chubak speculated that the upcoming 13F could reflect a reduced position of around 7% as of late 2024, with estimates suggesting current holdings might be closer to 5.5% or 6%.
Buffett initially invested $5 billion in Bank of America’s preferred stock and warrants in 2011 to restore confidence in the bank after the subprime mortgage crisis. He later converted those warrants into common stock in 2017, thereby becoming the largest shareholder. He further increased his investment by adding 300 million shares in 2018 and 2019.
