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Leave it up to Warren Buffett to change the entire sentiment in the U.S. banking sector.
Just before the open Thursday, Mr. Buffett somehow overshadowed the Steve Jobs news by announcing a $5 billion investment in embattled banking giant Bank of America (NYSE: BAC).
The news sent shares of Bank of America soaring. The stock is off the highs, but up still 17 percent to $8.19 at last check.
Over the past few sessions, shares of Bank of America have been under heavy pressure on speculation the company would have to raise billions to cover future mortgage losses. Some blogs recently speculated the total amount of capital needed would be $200 billion, but the company flatly denied this.
Bank of America sold 50,000 shares of Cumulative Perpetual Preferred Stock with a liquidation value of $100,000 per share to Mr. Buffett's Berkshire Hathaway, Inc. in a private offering. Berkshire will also receive warrants to purchase 700,000,000 shares of Bank of America common stock at an exercise price of $7.142857 per share.
CEO Brian Moynihan, said "I remain confident that we have the capital and liquidity we need to run our business. At the same time, I also recognize that a large investment by Warren Buffett is a strong endorsement in our vision and our strategy."
Mr. Buffett, who told CNBC's Becky Quick that he thought of the idea of the investment in the bathtub, said he called the company to make the investment.
"Bank of America is a strong, well-led company, and I called Brian to tell him I wanted to invest in it," Mr. Buffett said. "I am impressed with the profit-generating abilities of this franchise, and that they are acting aggressively to put their challenges behind them. Bank of America is focused on their customers and on serving them well. That’s what customers want, and that’s the company’s strategy."
Mr. Buffett already owns a large stake in Bank of America-rival Wells Fargo (NYSE: WFC).
The news is giving the entire banking sector a boost Thursday. Citigroup, Inc. (NYSE: C) is up 6 percent, Wells Fargo & Company (NYSE: WFC) is up 4 percent, JPMorgan Chase & Co. (NYSE: JPM) is up 3 percent, and The Goldman Sachs Group, Inc. (NYSE: GS) is up 2 percent.
Just before the open Thursday, Mr. Buffett somehow overshadowed the Steve Jobs news by announcing a $5 billion investment in embattled banking giant Bank of America (NYSE: BAC).
The news sent shares of Bank of America soaring. The stock is off the highs, but up still 17 percent to $8.19 at last check.
Over the past few sessions, shares of Bank of America have been under heavy pressure on speculation the company would have to raise billions to cover future mortgage losses. Some blogs recently speculated the total amount of capital needed would be $200 billion, but the company flatly denied this.
Bank of America sold 50,000 shares of Cumulative Perpetual Preferred Stock with a liquidation value of $100,000 per share to Mr. Buffett's Berkshire Hathaway, Inc. in a private offering. Berkshire will also receive warrants to purchase 700,000,000 shares of Bank of America common stock at an exercise price of $7.142857 per share.
CEO Brian Moynihan, said "I remain confident that we have the capital and liquidity we need to run our business. At the same time, I also recognize that a large investment by Warren Buffett is a strong endorsement in our vision and our strategy."
Mr. Buffett, who told CNBC's Becky Quick that he thought of the idea of the investment in the bathtub, said he called the company to make the investment.
"Bank of America is a strong, well-led company, and I called Brian to tell him I wanted to invest in it," Mr. Buffett said. "I am impressed with the profit-generating abilities of this franchise, and that they are acting aggressively to put their challenges behind them. Bank of America is focused on their customers and on serving them well. That’s what customers want, and that’s the company’s strategy."
Mr. Buffett already owns a large stake in Bank of America-rival Wells Fargo (NYSE: WFC).
The news is giving the entire banking sector a boost Thursday. Citigroup, Inc. (NYSE: C) is up 6 percent, Wells Fargo & Company (NYSE: WFC) is up 4 percent, JPMorgan Chase & Co. (NYSE: JPM) is up 3 percent, and The Goldman Sachs Group, Inc. (NYSE: GS) is up 2 percent.
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