Bank of America CEO Brian Moynihan took a moment to publicly acknowledge the contributions of Warren Buffett to the company during an investor conference in New York. He lauded Buffett, whose Berkshire Hathaway is Bank of America’s largest shareholder, as a stabilizing force for the company. However, Moynihan admitted that he remains in the dark about Buffett’s recent decision to decrease his stake in the bank, which has involved nearly $7 billion in share sales since mid-July. Despite the uncertainty, Moynihan reiterated that Buffett has been a valuable asset to Bank of America.
Berkshire Hathaway’s stake in Bank of America currently sits at approximately 11.1%, according to LSEG data. While Moynihan remained mum on Buffett’s motives for the divestment, analysts have been speculating on the reasons behind this shift in investment strategy.
Moynihan also turned his attention to the proposed changes in capital rules, a topic that has been drawing significant attention in the financial world. Federal Reserve Chairman Jerome Powell recently outlined a plan to raise capital requirements for large banks by 9%, a move that has sparked debate within the industry. While the initial proposal aimed for a more significant increase, it was ultimately scaled back following pushback from Wall Street.
Moynihan acknowledged that the proposed changes are manageable for Bank of America and emphasized that the company intends to continue its share buyback program. However, he voiced concerns about the potential impact of stricter capital requirements on the bank’s lending activities. According to Moynihan, an increase of 10% in capital could curtail $160 billion in loans, potentially impacting the ability of small businesses and mid-market companies to access competitive financing.
Looking ahead to the third quarter, Moynihan projected that investment banking revenue could reach around $1.2 billion, a slight increase from the $1.18 billion reported in the same period last year.
Despite the positive outlook on investment banking, Bank of America shares closed down 0.48% at $39.28 on Tuesday. The downward trend extended to exchange-traded funds holding the stock, with First Trust Nasdaq Bank ETF (FTXO), Invesco KBW Bank ETF (KBWB), and IShares U.S. Financial Services ETF (IYG) experiencing losses of 1.71%, 1.83%, and 1.11%, respectively.
