Following the disclosure that Berkshire Hathaway Inc, the company founded by multibillionaire investor Warren Buffett, had acquired a nearly $1 billion investment in the bank that specializes in credit cards, shares of Capital One Financial Corp recovered from their recent losses on Tuesday.
According to regulatory papers released on Monday, Berkshire purchased 9.92 million shares of Capital One, representing a $954 million holding based on the stock’s closing price on March 31.
The McLean, Virginia-based Capital One company is well known for its credit card advertising slogan, “What’s in your wallet?” It also has a sizable auto lending and commercial banking operation. American Express Co. and Bread Financial Holdings Inc. are among of its competitors.
The price of Capital One’s stock rose 2% to $91.53, its highest level since May 1. Since early March, the bank’s shares have decreased by about 15% as the banking crisis has decimated shares of American regional lenders.
Since markets have been concentrating on deposit withdrawals rather than deposit costs, a better indicator of their financial viability, a major selloff of U.S. regional bank stocks was exaggerated, according to Morgan Stanley analysts.
The analysts claimed that their shares are now undervalued and on the verge of a recovery in the coming few months since regional bank deposits are fairly sticky and data does not indicate outflows are accelerating.
Analysts at Bank of America Global Research raised Western Alliance Bancorp’s recommendation from “no rating” to “buy,” citing the bank’s sizable proportion of insured deposits and its capacity to absorb any deposit withdrawals thanks to its high profitability. Shares of Western Alliance increased by about 4%, while PacWest Bancorp fell by 3.3%. The KBW Regional Banking Index dropped by 0.38 percent.
