Recently, there have been a spate of sovereign wealth funds buying big stakes in distressed financials. Singapore’s Temasek Holdings and GIC, China’s China Investment Corp, and middle eastern funds flush with oil dollars have all injected cash into Morgan Stanley, Citigroup, UBS and Bear Stearns.
In an interview on CNBC, Warren Buffett mentions that he has been approached by some financial companies about buying a stake too but he has not seen anything that has caused him to be interested. Here’s a short extract from the interview:
Joe: Do you mind, Beck? Mr. Buffett, it’s Joe Kernen. Good to hear from you. A lot of the conjecture in the papers today talks about, you like to buy at rock-bottom prices when there’s distress. You look at the sovereign funds, I mean every country in the world sees some value in what’s happened to our financial companies here. You haven’t moved, it’s not like you don’t have another $40 billion. Are these not rock-bottom prices in your view?
Buffett: Well, I don’t know whether they are or not, but we’ve seen some deals, as you can imagine, in this period.
Joe: All of them, I would think.
Buffett: Yeah, people know our phone number. And we haven’t seen anything we want to move on. That doesn’t mean we won’t in the next six months. But so far we have not seen a deal that causes me to start salivating. But, but, I could be wrong on the ones I haven’t done and the big thing is I hope I’m not wrong on the ones I do do.
Becky: You know, Mr. Buffett, the Journal does point out today that the major banks could be less profitable over the next few years because of all the trouble that we’ve seen in the credit industry. Does that give you pause?
Buffett: No, I mean, there have been some mistakes made in banking. As (CEO) John Stumpf of Wells Fargo said, he said, ‘I don’t know why the banks had to find new ways to lose money when the old ones were working so well.’ And they managed to do so. And you don’t get all those, you don’t get all the problems behind you in a short period of time. So I would say that there are a number of banks that may do as well or better than they did in 2007, because they already started getting hit then. But, there were some sources of income that were kind-of illusionary but nevertheless got reported as income over the last few years. They won’t have those. They’ll have the clean-up of those. So it’s certainly possible some of the big banks aren’t going to hit their highs on earnings for a few years.
Melissa Lee: Mr. Buffett, if I can just jump in. It’s Melissa Lee. I’m just curious. Have you been approached by a major financial institution in terms of whether or not you would be interested in buying a stake?
Buffett: Yeah. Yeah.
Melissa: You have been? You turned them down?
Buffett: They sometimes do it indirectly because they don’t like to hear ‘no’ directly. (Laughter.)
For the complete interview, you can visit the CNBC page.