Warren Buffett’s Berkshire Hathaway is selling some of its stake in Wells Fargo, the US bank — but do not be alarmed, Wells shareholders, the investment guru has not lost faith in the troubled bank.
Berkshire said on Wednesday that it was in the process of offloading 9m Wells shares – about one-sixth of one percent of the company – in order to push its stake back down below 10 per cent.
That is an important threshold because the Federal Reserve deems anything above 10 per cent to be a controlling stake, worthy of additional regulatory scrutiny.
In its statement, Berkshire explains:
After several months of discussions with representatives of the Federal Reserve, we have concluded that the commitments that would be required of us by the Federal Reserve to retain ownership of 10% or more of Wells Fargo’s outstanding common stock would materially restrict our commercial activity with Wells Fargo. Therefore, it would be simpler to keep our ownership below 10%.
Wells is still dealing with the fallout from a fake accounts scandal that resulted in its losing its status as the largest US bank by market value. Mr Buffett has called Wells “a great bank that made a terrible mistake”, and said its new chief executive, Tim Sloan, is “exactly right” for the top job.