Buffett sells another big chunk of Wells Fargo

Warren Buffett has shifted money into a Wells Fargo rival, Bank of America. Photo / Getty Images

Berkshire Hathaway continues to aggressively reduce its stake in Wells Fargo, the troubled California bank that had long been a favourite of the conglomerate's chairman, Warren Buffett, who first started buying the shares in 1989.

Berkshire has sold more than 100m shares in Wells, worth almost US$2.5 billion ($3.7bn), since the end of June, according to a regulatory filing released on Friday. This comes on top of 86m shares sold during the second quarter. Berkshire now holds 138m shares in Wells, a 3.3 per cent stake, down from 8.4 per cent at the end of 2019.

Now that its ownership has fallen below 5 per cent, Berkshire will no longer be required to file a public report to the US Securities and Exchange Commission when it buys or sells shares.

Shares in Wells Fargo have fallen by almost half this year, badly lagging behind peer banks and the wider market, as falling interest rates and coronavirus-related credit issues make it more difficult for the company to recover from scandals that capsized its growth in 2016.

In the second quarter the bank reported a net loss of $2.4bn, driven by $8.4bn in provisions for future credit losses.

Wells chief executive Charles Scharf, who took the helm late last year, has committed to major cost cuts and has appointed new executives, many of whom worked with him at JPMorgan Chase. The appointees include a new chief financial officer, chief operating officer, leader of the credit cards division, head of public affairs and chief compliance officer.

Berkshire has also reduced its exposure to other banks this year, closing its position in Goldman Sachs and significantly reducing its stakes in JPMorgan and PNC Financial. At the same time, however, it has increased its exposure to Bank of America by $2bn since the end of the second quarter, leaving it with a $22bn investment.

As Berkshire has reduced its bank exposure, the conglomerate has added to its positions in Apple and, recently, purchased a small stake in Barrick Gold, despite Mr Buffett's historical scepticism about precious metals.

It has also invested $6bn in five of Japan's big trading houses, which are shifting from commodities to venture capital and private equity and whose conglomerate structure is not unlike Berkshire's own.