Warren Buffett gave his vote of confidence in Wells Fargo emergence from the financial issues it encountered in 2017.
Late last year, Wells Fargo got orders from The Federal Reserve to restrict the bank’s growth of assets. The bank had admitted last year that it created millions of fraudulent accounts for real customers to maintain its highly aggressive sales goals. Until Wells Fargo proves to the Federal Reserve that it has improved and resolved its internal controls, they will not be able to grow the bank’s assets from it’s current $2 trillion dollar level.
Berkshire Hathaway Owns 9.9 % of Wells Fargo Bank
As stated in Berkshire’s annual shareholder letter, Berkshire owns 482 million shares of Wells Fargo stock. This represents about 9.9% ownership of Wells Fargo Bank. Warren Buffet in this shareholder letter expressed his complete faith in the Wells Fargo new Chief Executive Officer, Tim Sloan. Also in this shareholder letter, Buffett did reveal that Wells Fargo is his company’s largest financial stake at $29.2 billion dollars, with Apple, falling right behind Wells Fargo, with Berkshire/Buffett having $28.2 billion dollar stake in Apple.
How Does Wells Fargo Current Situation Affect Berkshire/Hathaway?
In the first week of February of this year, Wells Fargo stock fell down more than 7% when the markets opened the first week of February 2018. For Warren Buffett and Brookshire Hathaway that meant a loss of more than $2.4 billion dollars. This drop is Wells Fargo’s stock share price is primarily due to Federal Reserve concerns over Wells Fargo’s aggressive sales goals and the resulting fraudulent accounts that Wells Fargo has. Wells Fargo has 60 days to provide the Federal Reserve with its plans to beef up its compliance operations. Before this Wells Fargo issues came to public attention last year, Buffett has said that if he was to put all of his stock holdings in one company it would be Wells Fargo. The jury still out on how this will affect Berkshire/Buffett in the long run. However, if history is allowed to repeat itself, Buffett and Brookshire will once again, emerge on top.