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Buffett Dismisses Government Stress Tests, Praises Wells Fargo
By Erik Holm, Betty Liu & Andrew Frye, Bloomberg
Omaha, Neb. — Berkshire Hathaway Inc. Chairman Warren Buffett dismissed the importance of the government stress tests in helping him assess banks, and said Wells Fargo & Co. will prosper no matter what the results show.
“I think I know their future, frankly, better than somebody that comes in to take a look,” Mr. Buffett said Saturday of the bank stocks that Omaha, Neb.-based Berkshire owns. Regulators “may be using more of a checklist-type approach.”
The stress tests are designed to show whether 19 top financial firms need more capital to withstand a deterioration of economic conditions, and results are expected to be disclosed on Thursday, according to a government official familiar with the plan. Mr. Buffett said he judges banks by their “dynamism” and their ability to attract deposits, and singled out San Francisco-based Wells Fargo as a “fabulous” company.
“If you look at Coca-Cola today, for example, and just looked at a balance sheet, it wouldn’t tell you anything at all about Coca-Cola,” the billionaire investor said in a Bloomberg Television interview before Berkshire’s annual meeting at Omaha’s Qwest Center. “It’s what the product is.”
Wells Fargo is Berkshire’s second-largest holding by market value after Coca-Cola Co. and the biggest bank on the U.S. West Coast. Berkshire also owns stakes in Goldman Sachs Group Inc., Bank of America Corp., the biggest U.S. bank by assets, as well as U.S. Bancorp, M&T Bank Corp. and SunTrust Banks Inc. Mr. Buffett has praised Wells Fargo for gathering funds at a low cost and taking fewer lending risks than competitors.
Competitive Advantages
“All banks aren’t alike by a long shot, and in our view Wells Fargo, among the large banks, has some advantages the others do not,” Mr. Buffett said at Berkshire’s annual meeting.
Wells Fargo has declined 33 percent this year on the New York Stock Exchange on concern the bank will take losses on loans acquired with the purchase of Wachovia Corp. The bank slashed its dividend 85 percent in March, reducing investment income for Berkshire.
“I think I know their future, frankly, better than somebody that comes in to take a look,” Mr. Buffett said Saturday of the bank stocks that Omaha, Neb.-based Berkshire owns. Regulators “may be using more of a checklist-type approach.”
The stress tests are designed to show whether 19 top financial firms need more capital to withstand a deterioration of economic conditions, and results are expected to be disclosed on Thursday, according to a government official familiar with the plan. Mr. Buffett said he judges banks by their “dynamism” and their ability to attract deposits, and singled out San Francisco-based Wells Fargo as a “fabulous” company.
“If you look at Coca-Cola today, for example, and just looked at a balance sheet, it wouldn’t tell you anything at all about Coca-Cola,” the billionaire investor said in a Bloomberg Television interview before Berkshire’s annual meeting at Omaha’s Qwest Center. “It’s what the product is.”
Wells Fargo is Berkshire’s second-largest holding by market value after Coca-Cola Co. and the biggest bank on the U.S. West Coast. Berkshire also owns stakes in Goldman Sachs Group Inc., Bank of America Corp., the biggest U.S. bank by assets, as well as U.S. Bancorp, M&T Bank Corp. and SunTrust Banks Inc. Mr. Buffett has praised Wells Fargo for gathering funds at a low cost and taking fewer lending risks than competitors.
Competitive Advantages
“All banks aren’t alike by a long shot, and in our view Wells Fargo, among the large banks, has some advantages the others do not,” Mr. Buffett said at Berkshire’s annual meeting.
Wells Fargo has declined 33 percent this year on the New York Stock Exchange on concern the bank will take losses on loans acquired with the purchase of Wachovia Corp. The bank slashed its dividend 85 percent in March, reducing investment income for Berkshire.
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