(August 26, 2011) — Berkshire Hathaway Chairman and Chief Executive Officer Warren Buffett’s investment vehicle has injected $5 billion into Bank of America, driving up its previously lagging shares.
“We are building the best franchise in financial services and we have laid out a clear plan to deliver long-term shareholder value,” said Bank of America Chief Executive Officer Brian Moynihan in a statement. “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.”
Buffett added: “Bank of America is a strong, well-led company, and I called Brian to tell him I wanted to invest in it. 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.”
Earlier this month, Moynihan asserted that Bank of America has no need for additional capital and that “we simply could not continue on a course of diluting our shareholders to raise capital”.
Buffett’s move follows a similar deal struck with Goldman Sachs along with GE during the 2008 financial crisis. However, Buffett famously refused to loan money to Lehman Brothers. He was correct in his predictions — Buffett’s Goldman Sachs investment reportedly generated a $3.7 billion profit for Berkshire Hathaway while Lehman folded.
To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742