Tycoon Buffett Buys $5bn Of US Bank Shares

US tycoon Warren Buffett has announced he is to buy $5bn worth of shares in Bank of America.

The move - the equivalent of £3.05bn - is a vote of confidence in America's beleaguered biggest bank, whose shares have halved in price since the beginning of May.

Analysts said it was not surprising the billionaire financier had decided the stock was now good value.

Mr Buffett, who bought the shares through his investment firm Berkshire Hathaway, said he was "impressed with the profit-generating abilities" of the group.

Bank of America (BoA) has been struggling in recent months under the weight of bad debts from mortgage lending, and last week announced it was cutting 3,500 jobs.

In the UK, over 3,000 staff at the bank's European credit card operations in Chester face a worrying time after BoA revealed it was looking for a buyer for the business.

Shares in the bank opened up 25% after Mr Buffett's announcement.

The 80-year-old investor's move to buy BoA shares has echoes of 2008, when he stepped in to invest $5bn in Goldman Sachs in the wake of the Lehman Brothers collapse.

Commenting on the surprise news, bank analyst Keith Davis of Farr, Miller & Washington said Mr Buffett's actions could cause "a pretty significant rally in the whole sector".

He added: "To have Buffett step in on Bank of America, which has been so troubled, that says volumes about what he thinks is ultimately going to happen in the housing market, and that the issues that banks are facing right now are solvable."

Mr Buffett, who made his money by purchasing companies he believed were worth more than their market value, hit headlines last week after calling on the US government to tax him more to help deal with the national deficit.

"My friends and I have been coddled long enough by a billionaire-friendly Congress," he wrote in the New York Times.

"It's time for our government to get serious about shared sacrifice."