Berkshire To Be Largest Bank of America Shareholder

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A higher dividend is something Mr. Buffett has said could prompt his Berkshire Hathaway swap its preferred shares in the bank into about $16 billion. If this were to happen, Berkshire would become the single largest shareholder in the banking giant, and after the recently released bank stress test results, it's highly likely to happen. So it's a quick $12 billion paper profit for the Oracle of Omaha.

Berkshire will use its $5 billion in Bank of America preferred stock to purchase the common stock at $7.14 per share, well below its closing price of $24.32 per share.

Berkshire bought its preferred shares in the bank in 2011, when the lender sorely needed to shore up investor sentiment.

The preferred shares also came with warrants to buy 700,000 shares of BofA stock at $7.14 a share - about where they were trading at the time.

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It was made possible by Bank of America's June 28 decision to boost its quarterly dividend to 12 cents per share from 7.5 cents, after passing the Federal Reserve's latest "stress test" of its capacity to weather hard markets.

Perhaps even more significant from a general shareholder's point of view, Bank of America also announced that its already-generous buyback program would be more than doubled for 2017. He earns about $300 million annually just for holding the stake.

The Warren Buffett-owned company plans to make the purchase at below-market prices through warrants that expire in 2021.

Buffett, 86, criticized the Republican plan last month at the annual meeting of his conglomerate, Berkshire Hathaway Inc. In the early years of the test, the bank struggled to get a clean approval for such capital-return hikes from the regulator.