Warren Buffett's bullish comments on banks during this morning' Squawk Box on CNBC helped boost the financial stocks in Berkshire Hathaway's portfolio today.
- American Express (151.6 million shares): Up 3.7 percent
- Bank of America (5 million shares): Up 19.4 percent
- M&T Bank Corp. (6.7 million shares): Up 1.5 percent
- SunTrust Banks (3.2 million shares): Up 7.8 percent
- U.S. Bancorp (67.5 million shares): Up 15.5 percent
- Wells Fargo (290.2 million shares): Up 15.8 percent
In comparison, the Financial Select Sector SPDR (XLF) ended the day with a gain of 1.3 percent.
Buffett especially praised Wells Fargo. Berkshire is the largest shareholder in the bank with a stake of about 7 percent.
"The spreads are enormous on what they're doing. They're getting the money at bargain rates... These are a couple of tough years for losses in the banking business, but you expect a couple tough years every now and then. And that the earning power is never--is going to be greater by far than it's ever been when you get all through with it. The only worry in that is the government will force you to sell shares at some terribly low price. And I hope they're wise enough not to do that."
At another point, Buffett told us, "I would say that if--if we own US Bancorp, which we do, or Wells Fargo, their prospects three years out have been better than ever... And if they weren't quoted, you know, people would feel fine owning the business and I think they would say that, you know, they're going to lose more--way more money than usual that--maybe this year and the next year, but they've built the provisions and all that sort of thing. They're going to come out fine unless they have to issue a ton more shares."
Buffett also told Joe Kernen that because American Express is becoming a bank holding company, it would create regulatory problems for Berkshire to buy additional shares. "It's very clear that American Express' losses in 2009 on their receivables will be, you know, considerably higher than last year. And their earnings will suffer to some degree accordingly. But that doesn't mean that American Express isn't a hell of a buy at $10. American Express is going to be around forever."
While Buffett conceded that shareholders could be wiped out in a few cases, he says most banks will "do fine earning their way" out of their current problems.
"Citigroup may be a special case. I mean, and I'm afraid that in a sense, the American public has sort of taken its view of all banks from what they read about Citigroup all the time. But there are 7,400 banks or something like that in the United States and most of them are just fine."
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