With David Sokol no longer in the running to be his successor, Warren Buffett said on Saturday he expects whoever follows him as chief executive of Berkshire Hathaway Inc will be “as straight as an arrow”.
Sokol was widely considered a top candidate to succeed Buffett as Berkshire’s chief executive. But he resigned under a cloud last month after it was revealed that he had bought $10 million of shares in Lubrizol Corp while he was pitching the chemicals company as a Berkshire takeover target.
Prior to Sokol’s departure, Berkshire had said it had four internal candidates to potentially succeed Buffett as chief executive. Analysts and investors widely believed Sokol was one of the four contenders, if not the leading candidate.
Buffett, 80, told shareholders at Berkshire’s annual meeting in Omaha, Nebraska that he was not sure it had been warranted to assume Sokol was his most likely successor.
“Certainly the candidate that I think is the leading candidate now, I would lay a lot of money on the fact that he is as straight as an arrow,” Buffett said.
‘US banks are less attractive’
With Berkshire Hathaway being the largest shareholder in Wells Fargo & Co having a stake in US Bancorp, Buffet said the country’s lenders were less attractive investments than they once were.
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“US banking profitability will be considerably less in my view in the period ahead than it was in the early part of this century,” Buffett said today at the annual meeting.
“A very important reason is that the leverage will be reduced. That’s probably a good thing for society. That may be a bad thing for banks who can use leverage intelligently.”
Revenue at six of the largest US banks declined by the biggest percentage in three years in the first quarter, as lending dropped and fees were reduced. With unemployment stuck above 8 per cent, housing prices falling again and restrictions on charges, the banks are underperforming the broader market.
“We still think that Wells Fargo and US Bank are very good operations, very decent businesses,” Buffett said. “Loan losses have been trending downward” for the industry.
Berkshire held 358.9 million shares of Wells Fargo at the end of first quarter, Buffett said today during his presentation to investors. That’s 4.8 per cent more than the 342.6 million shares Berkshire owned as of December 31.
Buffett maintained the firm’s investment of about 3.6 percent of U.S. Bancorp, making Berkshire the lender’s third- largest shareholder, while selling a stake in Bank of America Corp.
Net revenue at Bank of America, JPMorgan Chase & Co, Citigroup Inc, Wells Fargo, Goldman Sachs Group Inc and Morgan Stanley fell 13.3 per cent in the first quarter from a year earlier, according to data compiled by Bloomberg.
The KBW Bank Index of the 24 largest US lenders has fallen 1.3 per cent this year as the Standard & Poor’s 500 Index climbed 8.4 per cent.
“Banks periodically go crazy,” said Buffett. “It’s always on the asset side.”
Praise for potential successor Jain
Warren Buffett lavished praise on his reinsurance chief Ajit Jain on Saturday, saying the man many investors hope will succeed Buffett was devoted to Berkshire Hathaway and his work. Jain has long been seen as one of the few Berkshire executives who might replace the “Oracle of Omaha” when he no longer leads the conglomerate. With the investing scandal around former Buffett lieutenant David Sokol, many large investors now see Jain as the top choice. “I can’t think of any decision Ajit Jain has ever made that I could make better,” Buffett told shareholders in Omaha for Berkshire’s annual meeting. “To an extraordinary degree, he thinks about Berkshire first.”
Buffett also compared Jain to his business partner, Berkshire Vice Chairman Charlie Munger, saying both were highly rational thinkers.
Buffett has never been reserved in his praise for Jain, but shareholders are paying closer attention now that Sokol, once seen as Buffett’s heir apparent, is out of the picture. Investors gave Buffett a round of applause when he finished praising Jain.