1995: Why is Buffett buying banks now that they're well above their prices in 1990?

WARREN BUFFETT: OK, we’re ready to start here with a question from zone 1, if you’ll take your seats, please. We’ve got to —

AUDIENCE MEMBER: Mr. Buffett, I’m Brian Murphy (PH) from Clearwater, Florida.

I’d like to ask you a question concerning your present thinking behind your acquisitions of banks, such as PNC and SunTrust, particularly in light of the fact that banks were selling so cheaply in 1990 and now many have tripled in price.

And it would appear from recent publications and the financial literature that you’ve become much more interested in banks at these higher prices, relative to the 1990 valuations. Could you comment on your thinking there?

WARREN BUFFETT: Yeah, we really have no different — there’s no difference in the criteria we apply to banks than to other businesses. And a couple of publications have, maybe, made a little more of that than is warranted, because I doubt if there’s more than a couple percentage points difference in —

And we don’t think of it that way, incidentally. And we do not have a lot of sector — we don’t have any sector allocation theories whatsoever.

So, we simply apply the same criteria when looking at banks that we would at any other business that —

There — incidentally, there — sometimes, you should know, that there’s — I would say that maybe half, or maybe even a little more, of the reports about our activities are — in the press are erroneous. Now, some are accurate, too.

And then, of course, some are way out of date. I mean, we get confidential treatment on our — on the filings we make with the SEC as to our holdings, so they’re published well over a year after we’ve filed them.

And therefore, there have been a couple of stories in the last month or two as to something we’ve bought. And of course, if you read the story carefully, we bought it a year and a half ago, maybe. And we may have sold it, we may have bought more, all kinds of things.

So that, I’d be careful about press reports, generally.

We’ve — we actually — we bought a bank for Berkshire in 1969, the Illinois National Bank and Trust of Rockford. We’ve had an interest in the banking business.

We feel it’s something that we can — that falls within our circle of competence to evaluate. That doesn’t mean we’ll be right every time, but it — we don’t think it’s beyond us to understand the banking business. And so, it’s — we look at businesses in that area.

Charlie?

CHARLIE MUNGER: Nothing to add.