Bank failures have been a major topic of 2023 following the collapse of Silicon Valley Bank. This morning, Warren Buffett spoke on CNBC and answered various questions related to his stance on the banking system and bank stocks.
First and foremost, the famed investor noted that “nobody is going to lose money on a deposit in a U.S. bank” and that people “do not need to be panicked” about the banking industry. He also noted that the current banking system does not compare to the 2008 crisis. During 2008, Buffett helped toss Goldman Sachs (NYSE:GS) a lifeline of $5 billion in capital. Three years later, he provided another $5 billion of capital to Bank of America (NYSE:BAC).
Today, BAC stock is Berkshire Hathaway’s second-largest investment. The investment firm owns 1.01 billion shares, equivalent to an 11.19% 13F portfolio allocation.
Is Warren Buffett Giving Up on Bank Stocks?
Buffett’s stake in BAC contrasts with some of his previous actions. Last year, the Oracle of Omaha began selling off some of his other bank stocks, such as US Bancorp (NYSE:USB), JP Morgan (NYSE:JPM), and Wells Fargo (NYSE:WFC). While he believes the current banking situation is not as bad as in 2008, he also stated: “We’re not over bank failures.”
So, who’s to blame for the recent banking turmoil? Buffett believes it ultimately boils down to how well a bank is managed. Some of the “dumb” actions that the management of banks have taken are: having spotty accounting practices and mismatching assets and liabilities.
“Nobody is going to lose money on a deposit in a U.S. bank. It’s not going to happen… you don’t need to turn a dumb decision by managers into a panicking the whole citizenry of the United States about something they don’t need to be panicked about.”
In the meantime, Buffett praised the leadership behind Bank of America and CEO Brian Moynihan, adding that he does not want to sell out of BAC. BAC has an average price target of $36.77 among 23 analysts, implying an upside of about 30% from current prices.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
