Bloomberg News

Buffett Says Europe’s Banks Can’t Expect Berkshire to Help

September 30, 2011

(Updates with comments on Europe, the economy, Bank of America and stock buybacks, starting in the third paragraph.)

Sept. 30 (Bloomberg) -- Berkshire Hathaway Inc.’s Warren Buffett, who has sold most of the company’s holdings in European sovereign debt, said his firm isn’t interested in helping to bail out lenders on the continent.

“They need capital in their banks, in many of their banks,” Buffett, Berkshire’s chairman and chief executive officer, told Bloomberg Television’s Betty Liu today on the floor of the New York Stock Exchange. “We would not be a good prospect,” he said, adding that Berkshire has received “very, very few” calls about putting capital into European banks. “Not quite none at all,” he said, declining to name any firms.

Berkshire sold most of its European sovereign holdings about a year and a half ago, the billionaire said today on CNBC. A German reinsurance unit still holds some bonds from that nation, and Berkshire is “fine” with the investment, he said. As for the U.S. economy, Europe’s debt crisis is bound to have some fallout, he said. Still, the impact on the U.S. will be nothing like the 2008 credit crisis, Buffett said on CNN, and the domestic economy is still growing, he told interviewers.

Sagging Markets

European and U.S. stock markets have sagged on concern that Greece may default on its debts, setting off a chain reaction that could engulf other nations and their banks. Berkshire has made bullish derivative bets on global equity markets including contracts tied to the Euro Stoxx 50 Index, and Buffett has traveled to Europe in search of acquisitions.

Buffett, 81, said in July that Berkshire sold European sovereign holdings a year earlier and called the continent’s problems surmountable. His Omaha, Nebraska-based company has built the biggest equity stake in Germany’s Munich Re, the world’s No. 1 reinsurer.

Berkshire did come to the aid of Bank of America Corp., the largest U.S. lender, with a $5 billion purchase of preferred stock and warrants announced in August. While losses tied to faulty lending will take much longer to clean up, “the bank has a wonderful underlying business” and eventually will be a money-maker, Buffett said on Bloomberg TV.

“The bet is, is Brian going to get rid of those problems?” Buffett said, referring to Bank of America Chief Executive Officer Brian T. Moynihan, 51. “It won’t take six months or a year; it will take much longer than that even. But the underlying business is doing fine.”

Time for Moynihan

Moynihan deserves time to turn the Charlotte, North Carolina-based company around, according to the billionaire, who said he’d never spoken to Moynihan before last month. “I don’t want him to step down,” Buffett said. “Brian, stay at work.”

The U.S. hasn’t slid into a “double-dip” recession and that the economy doesn’t require stimulus from policy makers, Buffett said. Berkshire owns more than 70 businesses spanning insurance and energy to consumer goods and building supplies.

“We have a recovery going,” said Buffett, who has led Berkshire for more than four decades. “I don’t think that fiscal stimulus or monetary policy from this point forth will do a lot, to be perfectly honest. I do think that the natural regenerative juices of capitalism will do, and are doing, plenty.”

Ready for Elephants

Berkshire will be buying back its own shares because they’re undervalued, Buffett said. That doesn’t preclude purchasing shares of other firms or entire companies, including big ones, said Buffett, who told shareholders in his annual letter that his “elephant gun” is loaded.

“If an elephant comes along, we’re ready,” he said today. The buyback program “won’t keep us from investing billions and billions and billions in plants and equipment, in new acquisitions. We just announced an acquisition yesterday, Princeton Insurance for $400 million. We’re ready to buy lots of things.”

Buffett said Berkshire will have the funds to “spend a lot of money” repurchasing shares if the price is right. Since June, when Berkshire’s cash hoard totaled $47.9 billion, the company has spent about $4 billion on stocks, $5 billion on preferred equity in Bank of America and $9 billion on the takeover of Lubrizol Corp.

“We’ll keep creating capital all the time,” Buffett said of Berkshire’s ability to fund repurchases. “If the stock is cheap we will buy it in. If it isn’t cheap we won’t buy it.”

--With assistance from Hugh Son, Maryellen Tighe and Charles Mead in New York. Editors: Rick Green, William Ahearn

To contact the reporter on this story: Andrew Frye in New York at afrye@bloomberg.net

To contact the editor responsible for this story: Rick Green at rgreen18@bloomberg.net


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