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Berkshire dumps bank stocks; Northern Trust investment chief's diversity plea

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Portfolio pruning

Warren Buffett’s Berkshire Hathaway has “unloaded billions of dollars of bank stocks,” the Wall Street Journal reported. “Berkshire’s holdings of Wells Fargo and JPMorgan Chase stock dropped by more than $3 billion apiece in the second quarter, according to regulatory filings made public Friday. The company also dissolved its stake in Goldman Sachs, which was worth about $300 million at the end of the first quarter. Berkshire’s sales amount to a 26% drop in its shareholdings of Wells Fargo. His JPMorgan stake is down by 62%.

Warren Buffett, chairman and CEO of Berkshire Hathaway, speaks during the company's virtual annual shareholders meeting seen on a smartphone on May 2, 2020.
Warren Buffett, chairman and CEO of Berkshire Hathaway, speaks during the company's virtual annual shareholders meeting seen on a smartphone on May 2, 2020.

“He also sold shares of Bank of New York Mellon, M&T Bank, and PNC Financial Services Group among others. The conglomerate has simultaneously been adding to its ownership of Bank of America in recent weeks and now owns roughly 12% of the company.”

“In total, including both financial and non-financial stocks, Berkshire dumped $12.8 billion worth of shares in the quarter,” the Financial Times said. “Through Berkshire, Mr. Buffett is one of the single-biggest shareholders in U.S. banks and his decision to pare back his exposure will be parsed by investors globally, especially given the timing.”

Financial Times

Lonely at the top

Shundrawn Thomas, the head of Northern Trust’s $1 trillion asset management business, “has gone public to provide an insight into what has been experienced by many of his [African-American] colleagues and friends. In a widely read open letter, he described how a Chicago police officer unholstered his gun after stopping Mr. Thomas, who was driving to a movie with a friend.”

“I neither said nor did anything to warrant such treatment,” he said.

Although Thomas says there has been “material change” in the asset management industry, it must do more. “We see very little representation of Black Americans and Latino Americans in the investment industry. This is a particularly acute problem in client facing positions and senior leadership roles,” he said. “Diversity has to start at the top.”

Better than expected

Unsecured personal loans originated by online lenders like LendingClub, SoFi, Best Egg and Upstart “have defied sceptics in the Covid-19 pandemic, with delinquencies rising only moderately even as unemployment has spiked. Impaired marketplace loans — those that have fallen behind on payments or accepted payment forbearance — are 9.7% of the total, up from about 6% before the crisis began.”

“That is down from a peak of 16 per cent in April, and the impairment rate has continued to decline through the early weeks of August. This compares with total credit card loans in forbearance or delinquency at over 5% as of June, and mortgages at over 7%.”

Catching up

“Hong Kong investment bankers employed by Chinese banks are on track to outnumber those in the territory with Wall Street and international banks, in a reversal that underscores Beijing’s growing influence in the city. More than a year of political tumult has put the brakes on expansion by international banks in the Asian financial hub, with the passage of a controversial national security law likely to hasten this trend.”

“The hiring charge has been led by Beijing-backed investment banks including China International Capital Corp. Mainland Chinese companies in Hong Kong now employ over 2,100 investment bankers, up 4% from a year ago and just a few hundred shy of the total working for Wall Street banks including Morgan Stanley and Goldman Sachs.”

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