It's common for shareholders to score private meetings with company executives, but it's newsworthy when that means Warren Buffett is having a private dinner with Brian Moynihan, the chief executive of Bank of America.
On Aug. 6, the two met at Omaha's Happy Hollow Club, where Buffett is a member, according to people briefed on the dinner. On the menu: The economy, the banking sector, and—"very likely"—the state of his $5 billion investment in the bank, these people said. Buffett was said to have treated from his club account.
Buffett expressed bullishness on the banking sector, especially for institutions, such as BofA, with a strong deposit base. Buffett increased positions in Wells Fargo and U.S. Bank during the second quarter, and reaped large profits for stakes in Goldman Sachsand General Electric that he bought during the financial crisis.
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Brian Moynihan, CEO of Bank of America, and Warren Buffet, CEO of Berkshire Hathaway
Shares of Bank of America have risen more than 100 percent since Buffett took a similar stake in Bank of America in August 2011—leading Buffett to thank Moynihan for what is now a $5.27 billion paper profit for Berkshire Hathaway in just two years, these people said. A spokesman for Bank of America declined to comment.
Berkshire gets a dividend of 6 percent, or $300 million a year, for the money it, in effect, loaned to BofA through the purchase of preferred shares. Even more lucrative for Berkshire, though, are warrants it received as part of the deal that allow it to purchase $5 billion worth of BofA common stock at $7.14 per share.
With the stock now trading at $14.36, that's a paper profit of just over $5 billion.
There has been no indication of when Berkshire could look to exit the 10-year deal. While the $300 million annual dividend is costly for Bank of America, it must pay a 5 percent premium to Buffett to buy him out before the deal is over. Nonetheless, both Goldman Sachs and General Electric chose to buy out Buffett in less than three years.
—By CNBC's Kayla Tausche. Follow her on Twitter @kaylatausche.
