Berkshire Hathaway, the company run by Warren Buffett, has significantly reduced its investments in US banks in a recent filing as reported in the Financial Times. Assuming that Berkshire Hathaway invests based on its analysis of the future prospects of the companies in its portfolio, this shift would suggest concerns regarding the future profitability of US banks. Undoubtedly this thinking is based in part on the likely impact of COVID-19 on bank profitability. The Financial Times on 10 August published a somewhat detailed analysis of this impact and the prospects for banks resulting from COVID-19. In general the story is not a pretty one made even worse by the lack of certainty. Clearly banks face a very challenging and uncertain environment due to the impact of COVID-19.
Perhaps what Warren Buffett is thinking is that it is time to be cautious with banks. A lesson for others?
