26 Aug 2011

Buffett investing in Bank of America

10:04 am on 26 August 2011

Berkshire Hathaway is investing $US5 billion in Bank of America.

News of the announcement by investor Warren Buffett's company sent Bank of America's shares more than 25% higher.

The bank, which has been hit hard by the housing crash in the United States and subsequent market crisis, cut 3500 jobs this month.

Mr Buffett said that he was ''impressed'' that the bank was ''acting aggressively to put their challenges behind them''.

In July, the bank reported a record quarterly loss after agreeing to an $US8.5 billion settlement relating to sub-prime mortgages.

It is also being sued for $US10 billion by insurance group AIG.

The BBC reports the price of shares in Bank of America has halved in value over the past six months.

They rose to $US8.80 when the market opened on Thursday. In March they peaked at just under $US15.

Berkshire Hathaway, will get a 6% dividend in return for the investment.

Forbes markets editor John Dobosz says Mr Buffet has a shrewd eye for a good deal, in the same way he helped prop up Goldman Sachs and General Electric during the financial crisis.