Warren Buffett has been forced to make a rare declaration of intent about one of his key holdings – a small stake in America’s most successful bank, Wells Fargo.
A filing with the US Federal Reserve on Friday revealed that Berkshire Hathaway had inadvertently breached the 10% limit on bank shareholders (above which regulatory approval is needed).
And in doing so, Berkshire was forced to reveal part of Buffett’s private investments – he owns more than $US94 million worth of shares in the bank.
In Berkshire’s application to the Federal Reserve, it was revealed that Buffett’s personal stake, just over 2 million shares, combined with that of Berkshire’s (9.45% stake) now exceeds 10% of Well’s issued capital, “due to subsequent share repurchases by Wells Fargo.”
As a result, "Berkshire is seeking permission to retain its current ownership position… and to acquire additional shares of common stock of Wells Fargo for investment purposes, although Berkshire doesnot have any specific transaction or dollar value in mind with respect to any such potential purchases."
The company said, however, that it "routinely assesses market conditions and may decide to purchase additional shares of common stock of Wells Fargo based on its evaluation of the investment opportunity presented by such purchases."
Berkshire added that it "anticipates that any such purchases would be on the open market at prevailing market prices."
The Federal Reserve exerts special oversight when investors take large bank stakes.
In a September 2008 policy statement, the Fed said it often lets investors take double-digit bank stakes not designed to exert a "controlling influence," but would review any resulting business relationships "case-by-case."
And the US Treasury Department has said in the past it will not deem a 10% stake to result in “control” of a big bank if an investor agrees in writing to limits on its involvement.
Hitting the 10% level automatically requires a disclosure from the investor in order to hold such a large stake.
Wells Fargo is among Buffett’s largest investments, called the “Big Four” stocks, along with IBM, Coca Cola, and American Express.
