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buffett has struck again.

on friday, august 30, local time, the latest documents disclosed by the u.s. securities and exchange commission (sec) showed that berkshire hathaway sold about 21 million shares of bank of america and cashed in $848 million. from july to now, berkshire hathaway has reduced its holdings of bank of america by about $6.205 billion.

buffett sells bank of america again

on august 30th local time, sec documents showed that between august 28 and 30, berkshire hathaway sold approximately 21 million shares of bank of america, cashing in us$848 million.

(source of berkshire hathaway's latest reduction of bank of america stock documents: sec)

after this reduction, buffett's berkshire hathaway's shareholding in bank of america's outstanding shares fell to 11.4%. according to relevant regulations, if the shareholding ratio exceeds 10%, the transaction needs to be disclosed within a few days; if the shareholding ratio does not exceed 10%, there is no need to disclose the transaction as soon as possible, and it may usually take several weeks to disclose it in each quarterly report.

in july, berkshire hathaway sold off a large amount of bank of america shares. throughout july, the company sold a total of about $3.825 billion of bank of america shares.

berkshire hathaway's divestment activity continued in august. from august 15 to 19, the company sold about $550 million of bank of america shares. then, from august 23 to 27, it sold about $981.9 million of shares. in the latest sale announced on friday, from august 28 to 30, berkshire hathaway further sold about 21 million shares of bank of america, cashing in about $848 million.

to sum up, in the two months of july and august, berkshire hathaway cashed out a total of approximately us$6.205 billion.

buffett, 94, began investing in bank of america in 2011 by purchasing preferred shares and warrants for $5 billion. his berkshire hathaway eventually became the bank's largest shareholder and has remained that position ever since. after the latest sale, berkshire still holds 882.7 million bank of america shares, with a market value of $35.97 billion based on friday's closing price.

analysts believe that judging from the historical earnings trends of bank stocks, the combination of high inflation and high interest rates is good for bank stocks, but buffett chose to sell bank of america shares at this time, which shows that he does not agree with the inflation narrative. the federal reserve's upcoming interest rate cuts may be one of the reasons why buffett reduced his holdings in bank of america.

what will be the outlook for us banks if the interest rate cut channel is opened?

after warren buffett's berkshire hathaway continues to reduce its long-held bank of america shares, wsj analysts believe investors could consider buying into the opportunity.

according to the cme fedwatch tool, there is a 70% chance that the fed will cut interest rates by 25 basis points in september and a 30% chance that it will cut interest rates by 50 basis points. once the fed opens the channel for rate cuts, this will weaken the interest income of many banks. once interest rates are cut, the interest income brought to banks by loans priced at the benchmark rate will begin to decrease.

according to bank of america's forecast, if the federal reserve cuts interest rates three times by 25 basis points each time before the end of the year, bank of america expects its fourth-quarter net interest income to be approximately $225 million less than in the second quarter.

however, wsj analysts believe that there are some factors that can help bank of america offset this adverse effect. since last year, the large bond portfolio has been a pain point for bank of america in the eyes of some investors, but this pain point will become a potential relative advantage as interest rates fall in the future. at that time, not only will these low-yielding old bonds be likely to appreciate in value, but the large number of securities maturing every quarter will continue to provide a significant boost to net interest income next year, as those funds will be redeployed at current yields after maturity.

according to bank of america's forecast, these factors, coupled with the continued maturity of fixed-rate loans such as auto loans and home mortgages, will increase the bank's net interest income by about $300 million in the fourth quarter compared with the second quarter, thus offsetting the negative impact of the interest rate cut. in addition, net interest income is facing several positive factors waiting to be unleashed. bank of america said in a report that the maturity of cash flow swap hedges designed to protect against falling interest rates may start to increase net interest income in the second half of next year.

according to analyst expectations collated by visible alpha, analysts expect bank of america's net interest income to grow by at least 5% in 2025, while large banks such as citigroup, jpmorgan chase and wells fargo are expected to see much smaller increases or even declines in net interest income. many analysts believe that bank of america's investment banking revenue currently contributes relatively more to its total revenue than peers such as citigroup and jpmorgan chase. therefore, if the expected rate cuts help stimulate more corporate activity, bank of america will be the biggest beneficiary.

it is worth mentioning that in the federal reserve’s latest stress test for a severe economic downturn, the estimated loan loss rate of us banks was 5.5%, far lower than the average estimated loan loss rate of 7.1% for the 31 large banks tested.