Buffett: Worried That Banks Will Dilute Shareholders -CNBC
By Daniel at 11 March, 2009, 9:37 am
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U.S. banks that are in good shape should not be forced to raise capital by
diluting current shareholders, said Warren Buffett, who owns shares of several
banks through the company he runs, Berkshire Hathaway Inc. (BRKA BRKB)
“People may take their view of banks from Citibank,” as it struggles with
continuing losses, but banks generally should be doing well, Buffett said during
an interview Monday on CNBC’s Squawk Box. “Banking has never been better in one
sense, they are getting money cheaply. They will earn their way out of this in
the overwhelming number of cases.”
Buffett, a big financial services investor, said he is worried that banks will be
forced to raise capital through issuing new shares, in order to cover
market-value losses on their holdings. Such a move would dilute holdings of
current shareholders such as Buffett, who owns shares in American Express Co.
(AXP), Wells Fargo (WFC), and U.S. Bancorp (USB).
Citigroup (C) and American International Group (AIG) ran into trouble by keeping
deals off their balance sheets through derivatives or special purpose vehicles in
order to reduce the amount of capital they had to hold.
Berkshire Hathaway had its worst year ever in 2008, as the economic downturn hit
its investment portfolio hard.
A common metric Berkshire uses to track performance, book value per share, fell
9.6% in 2008, its biggest decline since Buffett took over the company in 1965
when it was a family run East Coast textile maker.
By Lavonne Kuykendall
Of DOW JONES NEWSWIRES
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