Warren Buffett’s Berkshire Hathaway bet almost $1bn on credit card issuer Capital One

Warren Buffett’s Berkshire Hathaway placed a $954mn bet on credit card and banking company Capital One in the first quarter, one of the few new stakes added by the investment group in a period when it was dumping billions of dollars worth of stocks.

The disclosure of the investment on Monday signalled Berkshire’s and Buffett’s comfort with the credit card industry and the health of consumers’ pocketbooks even as several regional banks have been swept up in financial turmoil. Capital One describes itself as the third largest issuer of Visa and Mastercard credit cards in the US.

Berkshire has concentrated its financial industry investments on a handful of large US banks — Bank of America and Citigroup — as well as credit card companies including American Express, Visa and Mastercard.

Buffett, Berkshire’s chief executive, earlier this month struck a cautious tone about the prospects of the banking industry, warning that the speed of bank runs in an age of online accounts had changed the calculus of investing in the sector.

“You don’t know what happened to the stickiness of deposits at all . . . and that changes everything,” he told shareholders gathered in Omaha for the company’s annual meeting. “You can have a run in a few seconds.”

The regulatory disclosure on Monday also showed Berkshire exited its positions in US Bancorp and Bank of New York Mellon in the first quarter.

The 2.6 per cent stake Berkshire purchased in Capital One complements its large bet on auto and home lender Ally Financial, which it made last year. Berkshire modestly trimmed its position in Ally in the first quarter.

Shares of Capital One jumped 6 per cent in after-hours trading.

Capital One has been increasing its provisions for credit losses as the economy slows and inflation nips at the heels of consumers. But the company has not been engulfed by the same fears that have weighed on the broader banking industry. Its shares have fallen about 4 per cent this year, compared to a 26 per cent drop by the KBW bank index.

Berkshire also disclosed it had cut its stake in oil major Chevron by about a fifth, selling roughly 35mn shares between its own accounts and an investment portfolio managed by a subsidiary.

The company exited its remaining position in chipmaker Taiwan Semiconductor Manufacturing, with Buffett hinting at the geopolitical tension between Taiwan and China for the share sales this year and last year.