Buffet - selling some banks

[MichealKnight]

https://www.cnbc.com/2022/11/10/war...8-billion-of-longtime-holding-us-bancorp.html

"Berkshire started unloading its bank stocks this year, exiting positions in JPMorgan, Goldman and Wells Fargo. The conglomerate still owned a sizable stake in Bank of New York Mellon at the end of the second quarter."

Article also says he sold US Bancorp - because BRK's stake fell below 5%.

Financials I have small holdings of: Goldman, JPM, BAC. Also regionals such as Truist, Fifth Third. Regions.

Wondering - what it means - that he sold a decent amount of financials.

 

[arcyallen]

We'd have to hear it from Warren directly, but I'd guess it's the same reason he sells many of his investments: They no longer are good values. I don't think it's a call on anything specific, but many considerations put together.

 

[Texas Proud]

Behind paywall....


But, I remember that he acquired a bunch of financials back in the 08 time period with great terms... maybe some of this is closing out those positions.


The other question would be... is it Warren making the call?

 

[copyright1997reloaded]

Behind paywall....


But, I remember that he acquired a bunch of financials back in the 08 time period with great terms... maybe some of this is closing out those positions.


The other question would be... is it Warren making the call?

Or, he is thinking we may repeat conditions that made them such "good buys" in 2008? Ugh (as a stockholder of several banks).

 

[bobandsherry]

https://www.cnbc.com/2022/11/10/war...8-billion-of-longtime-holding-us-bancorp.html



"Berkshire started unloading its bank stocks this year, exiting positions in JPMorgan, Goldman and Wells Fargo. The conglomerate still owned a sizable stake in Bank of New York Mellon at the end of the second quarter."



Article also says he sold US Bancorp - because BRK's stake fell below 5%.



Financials I have small holdings of: Goldman, JPM, BAC. Also regionals such as Truist, Fifth Third. Regions.



Wondering - what it means - that he sold a decent amount of financials.

I thought he sold out of JPM way back. The following article mentions he exited JPM 4th quarter 2020. And he purchased VZ, so don't think he made a good move then. Since then JPM up 20% and VZ down 30%.

https://www.cnn.com/2021/02/16/investing/berkshire-hathaway-warren-buffett-stocks/index.html

This is list of shares that Berkshire held as of June 2022, no mention of JPM. Looks like he dumped VZ too.

https://www.sec.gov/Archives/edgar/data/1067983/000095012322009450/xslForm13F_X01/15796.xml

 

[Quattro73]

I think with the stress testing, increased regulation, and capital requirements, the commercial banking sector generally is much healthier now than in the early 2000s. However those things that make banks healthier from a safety and soundness perspective limit their ability to generate outsized returns for investors. Couple that with continued pressure on non-interest income sources like NSF and OD fees, plus the large compliance and technology costs - future bank returns will probably be muted. Buffett selling on a run up makes sense to me.

 

[MichealKnight]

Regional Banks like Fifth Third, Regions, etc. Does anyone see merit in this thought process: Their business is understandable. They aren't in China or Qatar or whatever. Many times - while it's not like a Mayberry bank - the bank managers know their customers - even commercial customers and are a bit more careful when making loans. Many of their customers are just normal folk - they use said banks for depositing money - money the bank pays little for - yet can turn around and issue 7% mortgages on, 5% car loans, or just earn 4% with Uncle Sam.

Hence - barring crashes. it's sort of steady Eddie growth - many times with 3-4% dividends.

 

[Montecfo]

Regional Banks like Fifth Third, Regions, etc. Does anyone see merit in this thought process: Their business is understandable. They aren't in China or Qatar or whatever. Many times - while it's not like a Mayberry bank - the bank managers know their customers - even commercial customers and are a bit more careful when making loans. Many of their customers are just normal folk - they use said banks for depositing money - money the bank pays little for - yet can turn around and issue 7% mortgages on, 5% car loans, or just earn 4% with Uncle Sam.

Hence - barring crashes. it's sort of steady Eddie growth - many times with 3-4% dividends.

Tend to agree. I own several. Truist, MS, GS, MTB, FHN (which has pending merger). I swapped out of big money center banks and some regionals for Indexes: KRE and VFH . They have done pretty well all things considered.

Banks will be challenged in recession but should lead us out.

 

[SecondAttempt]

Regional Banks like Fifth Third, Regions, etc. Does anyone see merit in this thought process: Their business is understandable. They aren't in China or Qatar or whatever. Many times - while it's not like a Mayberry bank - the bank managers know their customers - even commercial customers and are a bit more careful when making loans. Many of their customers are just normal folk - they use said banks for depositing money - money the bank pays little for - yet can turn around and issue 7% mortgages on, 5% car loans, or just earn 4% with Uncle Sam.

Hence - barring crashes. it's sort of steady Eddie growth - many times with 3-4% dividends.

I think you are missing something. Banks don't keep mortgages. They fund them then sell them to big consolidators, very often before closing. Sometime the local bank retains servicing so the customer may not be aware.

I worked for many years for a startup. We were super risky yet regional banks fought to get in line to lend to us.

I have nothing against regional banks but I think your premises are flawed.

 

[MichealKnight]

Thanks for the points

I think you are missing something. Banks don't keep mortgages. They fund them then sell them to big consolidators, very often before closing. Sometime the local bank retains servicing so the customer may not be aware.

I worked for many years for a startup. We were super risky yet regional banks fought to get in line to lend to us.

I have nothing against regional banks but I think your premises are flawed.

True - was not factoring in the regionals selling mortgages off.

However - the bank is the one who obtained that business. They put some time and labor into doing the whole exercise. They now own the paper - which - if they are right will be paying interest over a long period of time, on an asset that is (usually lol) safe and appreciating.

So - said paper - when they sell it off - -don't they ask for a profit?

In layman's terms (easy for me ...if I do all of that and I score the mortgage.....and I'm going to sell it to you - yeah, I'm going to realize a decent profit?

 

[COcheesehead]

The profit on mortgages are made in the transaction fees, not holding the paper long term. Investors, you and I, hold the paper in the form of agency bonds and the like.