Following the persistent reduction of Berkshire Hathaway's multi-year position in Bank of America (BAC) throughout the second half of 2024, what is the projected technical impact on the stock's valuation multiple relative to peers, and does the current Price-to-Tangible Book Value (P/TBV) accurately reflect the removal of this institutional overhang?

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The persistent reduction of Berkshire Hathaway’s position in Bank of America (BAC) throughout the second half of 2024 and into 2025 has transitioned from a primary technical "overhang" to a secondary fundamental consideration. While the immediate selling pressure has largely been absorbed, the stock’s valuation multiple continues to trade at a significant discount to its primary peer, JPMorgan Chase (JPM), reflecting both the legacy of the institutional exit and underlying operational divergences. 📊 Institutional Exit & Overhang Dynamics Berkshire Hathaway began its divestment in mid-July 2024, executing a systematic liquidation that reduced its stake from approximately 13% to below the 10% regulatory threshold by October 2024. By early 2026, reports indicate the position has been trimmed by roughly 50% from its peak, totaling over 400M shares sold. Technical Pressure: During the peak selling window (H2 2024), BAC consistently underperformed the KBW Bank Index. The "overhang" acted as a ceiling on the valuation multiple, as the market anticipated a steady supply of shares regardless of fundamental performance. Reporting Lag: Once the stake fell below 10% , the requirement for two-day Form 4 filings ceased, shifting disclosure to quarterly 13F filings. This reduced daily "headline risk" but introduced "shadow overhang," where investors remained cautious of potential unannounced selling. ⚖️ Comparative Valuation: P/TBV Analysis As of early 2026, Bank of America’s Price-to-Tangible Book Value (P/TBV) has stabilized but remains compressed relative to the "gold standard" peer group. | Metric | Bank of America (BAC) | JPMorgan (JPM) | Wells Fargo (WFC) | Citigroup (C) | | :--- | :--- | :--- | :--- | :--- | | Current P/TBV | 1.84x | 2.50x+ | 1.55x | 1.10x | | 5-Year Median | 1.70x | 2.10x | 1.35x | 0.85x | The current 1.84x P/TBV suggests that while the "forced selling" discount has narrowed, BAC has not yet reclaimed its historical premium relative to the broader sector median. The gap with JPM remains wide at approximately 70-100 bps of multiple turns. 🔍 Fundamental vs. Technical Discount The persistence of the valuation gap suggests that the market is no longer solely pricing in the "Buffett Overhang," but rather shifting focus to structural headwinds: 1. Interest Rate Sensitivity: BAC remains the most asset-sensitive of the "Big Four." In a rate-easing cycle, its Net Interest Income (NII) is projected to face more significant compression than peers with more diversified fee-income streams. 2. Efficiency & ROE: BAC’s efficiency ratio of approximately 65% lags JPM’s 52% . Furthermore, its Return on Equity (ROE) of 10.1% is substantially lower than JPM’s 17.8% , justifying a structural P/TBV discount. 3. Bond Portfolio Legacy: The bank’s massive "Held-to-Maturity" (HTM) securities portfolio, largely comprised of low-yield MBS purchased during the pandemic, continues to weigh on the yield on total earning assets ( 4.64% vs. JPM’s 6.7%+ ). 🚩 Risks & Uncertainties Residual Stake: Berkshire still holds a multi-billion dollar position. Any resumption of aggressive selling could re-trigger technical weakness. Regulatory Capital: Proposed changes to Basel III "Endgame" rules may impact capital return capabilities, potentially limiting the share buybacks needed to support the P/TBV multiple. Macro Transmission: A harder-than-expected economic landing would disproportionately affect BAC’s large consumer credit card and mortgage portfolios. 💡 Conclusion on P/TBV Accuracy The current P/TBV of 1.84x appears to accurately reflect the removal of the acute institutional overhang, as the stock has decoupled from the "sell-on-filing" pattern observed in late 2024. However, it incorporates a "quality discount" related to operational efficiency and NII trajectory. For the multiple to re-rate toward 2.0x+ , the catalyst must shift from the absence of a seller (Berkshire) to the presence of a growth driver (NII stabilization or improved ROE).

Metric	FY2025	FY2024	FY2023	FY2022	FY2021
Revenue	$188.75B	$192.43B	$171.91B	$115.05B	$93.85B
Gross Profit	$104.61B	$96.07B	$94.19B	$92.41B	$93.71B
Gross Margin	55.4%	49.9%	54.8%	80.3%	99.8%
Operating Income	$34.88B	$29.25B	$28.34B	$30.97B	$33.98B
Net Income	$30.63B	$27.13B	$26.52B	$27.53B	$31.98B
Net Margin	16.2%	14.1%	15.4%	23.9%	34.1%
EPS	$3.88	$3.25	$3.10	$3.21	$3.60

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