At this year's Warren Buffett and Berkshire Hathaway’s 2023 Annual Meeting, as expected, shareholders asked questions about the banking industry. The first question is related to Silicon Valley Bank, which collapsed in March this year.
The first question is what would happen to the U.S. economy if deposits in Silicon Valley banks over the $250,000 deposit insurance limit were not insured. That would be "catastrophic," Buffett replied, which is why the U.S. government stepped in to safeguard all Silicon Valley bank deposits.
Buffett says the incentives for bank regulation are too confusing and many people want to make them go wrong. This is crazy. Because of online banking, we can have a run in seconds.
Munger said, I am very old-fashioned, I prefer banks that do not do investment banking business. Bankers should be more like engineers who figure out how to stay out of trouble rather than get incredibly rich.
Buffett said he likes the business and management of Bank of America, which Berkshire initiated the deal for, and "I'm going to stick with it."
At the same time, he said, Berkshire remains very cautious about owning banks. He can't tell what the future holds for the shareholders of the big, regional banks. From the perspective of investment banks, owning banks, some events will determine their future.
As wallstreetcn mentioned, Munger recently warned that a storm is brewing in the U.S. commercial real estate market, with U.S. banks "flooded with bad loans" as property prices fall. Munger believes that Berkshire's restraint stems in part from the risks that the bank's large commercial real estate loans may pose.
Troubled banks are not value stocks, Buffett warns.
When talking about his bank stock holdings, Buffett said that the recent sell-off of bank stocks is not a negative view of the industry, but just a cooling of sentiment towards the industry. "I really like the CEO of Bank of America, Brian Moynihan, I just don't want to sell it," he said of Bank of America, the only major bank holding currently.
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