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Berkshire said on Friday it would exercise its warrants for 700
million common shares of Bank of America following a dividend
increase by the lender to 12 cents per share.
Bank of America's shares were up 1.1 percent in premarket
trading on Friday.
The second-largest U.S. bank boosted its annual dividend on
Wednesday to 48 cents per share from 30 cents, beginning in the
third quarter, after its plan to return capital was approved by
the Federal Reserve under its annual "stress test" program.
Buffett had bought $5 billion of Bank of America preferred stock
with a 6 percent dividend, or $300 million annually, in August
2011, when investors worried about the bank's capital needs.
The purchase included warrants to acquire 700 million common
shares at $7.14 each, less than one-third of Thursday's closing
price of $24.32.
If Omaha, Nebraska-based Berkshire made the swap now, it would
have a paper profit of about $12 billion and begin collecting
$336 million of annual dividends, on top of roughly $1.7 billion
of dividends already paid.
Buffett's move underscores his confidence in Brian Moynihan,
Bank of America's chief executive.
Moynihan has worked to restore investors' confidence in his
Charlotte, North Carolina-based bank after it spent more than
$70 billion since the global financial crisis to resolve legal
and regulatory matters, largely from its purchases of
Countrywide Financial Corp and Merrill Lynch & Co.
Berkshire, which is also Wells Fargo & Co's <WFC.N> biggest
shareholder, said it expected to use the preferred shares to
fund the acquisition.
Vanguard Group, which is currently BofA's biggest shareholder,
holds 6.6 percent stake, or about 652 million shares in the
company.
(Reporting By Aparajita Saxena in Bengaluru; Editing by Anil
D'Silva)
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