By Niket Nishant and Manya Saini

(Reuters) – Warren Buffett-led Berkshire Hathaway further cut its stake in Bank of America, a late Monday filing showed, netting the investment giant more than $10 billion since it started the share sale in July.

Buffett, who began investing in the second largest U.S. lender in 2011, had a 13.1% stake worth around $45 billion as of July. The latest round of sales have reduced the stake to 10.1%.

The selling spree by Buffett appears to be unnerving other BofA shareholders, at a time when the outlook for the banking industry remains murky amid fears over a possible U.S. recession.

Since Berkshire’s first sale in July, BofA’s shares have lost nearly 7% of their value, while JPMorgan Chase – the biggest U.S. bank – has inched up 0.5%. The KBW Bank index has risen nearly 2% in the same period.

“When one of America’s foremost investors is selling, that creates apprehension,” said Macrae Sykes, portfolio manager at Gabelli Funds who has invested in BofA via funds.

Since 2020, Buffett’s large holding has made him a company insider under U.S. regulations, but he has never behaved as an active investor. If he were to reduce his stake further, it could worsen the pressure on the stock, analysts said.

“You need to have a very, very, very deep understanding of any company that Buffett is trading in, to say that you understand things better than him,” said Odysseas Papadimitriou, CEO of personal finance firm WalletHub.

Buffett has not disclosed his reasons for selling down his stake. Berkshire did not immediately respond to a request for comment, while BofA declined to comment.

The bank will report results next week, along with peer Citigroup, with investors keeping a close eye on the potential impact from higher deposit costs and tepid loan demand.

BofA shares are unlikely to rebound in the near future, according to Suryansh Sharma, equity analyst for financial services for Morningstar Research, who said the stock was “not cheap” after having recovered nearly 50% from 2023 lows.

“Going forward, there are very few positive things that can happen, which can further rally the stock,” he said.

Buffett began investing in BofA in 2011, when many investors worried about the bank’s capital needs after the financial crisis.

BofA CEO Brian Moynihan praised Buffett last month, calling him a “great investor (who) stabilized our company”. Since Buffett’s investment, the bank’s shares have jumped nearly six-fold.

Moynihan said he did not know the rationale behind the share sale. In the recent years, Buffett has also retreated from Wells Fargo, a holding he had since 1989. His portfolio still includes a nearly $3.5 billion stake in Citi, which is in the middle of a revival under CEO Jane Fraser.

ECONOMIC ANXIETY?

Some investors see Buffett’s move as a sign of his doubts over the U.S. economy against the backdrop of inflation and elevated interest rates.

Others interpreted his moves as a reflection of diminished confidence in the stock market, which he has said exhibits “casino-like behavior”.

BofA, however, is not the only stock that Buffett has dumped recently. Earlier this year, Berkshire halved its stake in technology behemoth Apple.

At the investment giant’s annual meeting in May, Buffett said selling made sense as the federal tax rate on capital gains could grow depending on who wins the U.S. election.

“Buffett is a very tax-efficient entity. He’s been around for a long time,” said Art DeGaetano, founder and CIO of Bramshill Investments.

(Reporting by Niket Nishant and Manya Saini in Bengaluru; Editing by Arun Koyyur)

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