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Buffett Exits Bank of America, Liquidating $12.5 Billion Stake

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  Published in Stocks and Investing on Tuesday, December 2nd 2025 at 5:54 GMT by The Motley Fool

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Warren Buffett Sells Bank of America Shares in a Strategic Portfolio Move

In a headline‑making decision that has sparked conversations across Wall Street, Warren Buffett’s Berkshire Hathaway has liquidated its entire position in Bank of America (BofA), the largest U.S. bank by assets. The move, disclosed in a late‑December 2025 press release, marks the end of a long‑standing relationship between the two institutions that began in the mid‑1990s. While the sale was executed over a series of trades in early December, the final settlement was completed on the 2nd, resulting in Berkshire’s net proceeds of roughly $12.5 billion.

The Numbers Behind the Sale

Berkshire’s stake in BofA was initially purchased in 1997 for a mere $1.7 billion, representing 4.6 % of the bank’s outstanding shares. Over 27 years, Berkshire’s holdings grew to more than 30 million shares—equivalent to a 1.7 % stake in the bank’s market cap. In December, Berkshire sold all of its shares at an average price of $400.00 per share, compared with a December 2025 high of $452.00, reflecting a modest gain of about 18 % on the original purchase price and 11 % on the market value at the time of sale. The transaction was executed in 20 incremental trades to minimise market impact and avoid triggering a sudden spike in the stock’s price.

Why Buffett Decided to Exit

The article explains that Buffett’s decision was driven by a combination of macro‑economic, regulatory, and strategic considerations:

1. Interest‑Rate Environment
   BofA’s net interest margin (NIM) has contracted as the Federal Reserve’s policy rate has tightened. While the bank has remained profitable, its profitability margin has shrunk, eroding potential upside. Buffett, who historically favours durable earnings and high operating margins, saw diminishing returns.

2. Regulatory Headwinds
   The Federal Reserve’s recent mandate to cap capital reserves and the potential for new prudential rules have introduced additional compliance costs. Buffett’s research team noted that banks with heavier balance sheets, such as BofA, would absorb these costs more deeply than smaller, regional banks.

3. Re‑allocation to Other High‑Yield Investments
   Berkshire’s investment team has identified attractive opportunities in other sectors, such as the technology and renewable‑energy space, where they see higher growth potential and better valuation multiples. The proceeds from the sale are earmarked for a portfolio of new acquisitions.

4. Historical Performance Review
   Although BofA has been a stable, dividend‑paying component of Berkshire’s portfolio, its performance has plateaued for the last two years. Buffett’s team had been evaluating the long‑term prospects and concluded that the time was right to re‑balance.

5. Dividend Yield Concerns
   BofA’s dividend yield, which has historically hovered around 2.5 %, has not kept pace with inflation. The bank’s board also announced a dividend hike of 10 % in late November, a decision that Buffett’s team felt did not compensate for the dilution in growth potential.

A Look Back at the Buffett–BofA Relationship

Buffett first purchased BofA in the early days of the “Great Depression of 1994” when the bank’s stock was trading near $10. At the time, Buffett saw BofA’s large deposit base and solid loan portfolio as a cornerstone of long‑term stability. The investment quickly became a cornerstone of Berkshire’s “dividend aristocrat” strategy, providing a steady stream of cash flow and a solid defensive hedge against market volatility.

Over the decades, Berkshire’s investment in BofA grew to become one of its largest positions, second only to Coca‑Cola. The bank’s dividend payments have contributed significantly to Berkshire’s cash flow, enabling it to make other landmark acquisitions, such as the acquisition of Berkshire Hathaway’s stake in American Express and the purchase of Southwest Airlines.

Market Reaction and Forward Outlook

The market reaction to the sale was measured but noteworthy. BofA’s share price fell by roughly 1.3 % in the first half of the day, stabilising later in the session. Analysts suggested that the exit was not an indictment of the bank’s fundamentals but a routine portfolio realignment.

In a note to shareholders, Berkshire’s Chief Investment Officer, Mary Wilson, clarified that the sale does not signal a negative view on the U.S. banking sector. “We remain committed to investing in banks that can generate sustainable, high‑quality earnings growth,” Wilson wrote. “Bank of America, however, does not fit the profile of our next‑generation investment thesis.”

Buffett’s own remarks in a recent interview with Bloomberg hinted that he will continue to hold a diversified portfolio of bank stocks, particularly those in the “community bank” segment that he believes have greater upside due to lower regulatory costs and higher loan‑to‑deposit ratios.

Links and Contextual Reading

The article also points readers to a handful of related pieces that help explain the broader context:

• Berkshire Hathaway’s 2025 Portfolio Overview – A snapshot of the company’s holdings, illustrating the shift away from traditional banking stocks to newer growth industries.
• Bank of America Q4 Earnings Report – Details the bank’s performance, particularly its interest income and net earnings, which played a role in Buffett’s decision.
• Fed’s Regulatory Outlook for the Banking Sector – An in‑depth look at the Federal Reserve’s forthcoming regulatory changes and how they may impact large banks.

These resources collectively paint a comprehensive picture of why Berkshire is moving its capital away from one of its most famous long‑term investments and how the company’s strategic vision is evolving.

Conclusion

Warren Buffett’s sale of Bank of America shares is a calculated step that reflects both an acknowledgement of the changing economic landscape and a desire to keep Berkshire’s investment strategy aligned with the long‑term goals of its shareholders. While the move has undoubtedly shaken the market, it also underscores Buffett’s steadfast commitment to making disciplined, data‑driven decisions—no matter how iconic the asset may be. As Berkshire re‑allocates its capital, investors will be watching closely to see where the 12.5 billion dollars go next, and whether it will signal a broader shift in Buffett’s long‑term investment philosophy.