Buffett 'already $1.3bn in profit' on BofA deal

Shares in Bank of America closed almost 10% higher overnight after Warren Buffett pledged to take a $5bn stake in the firm, which may have already netted him a $1.3bn profit.

BofA shares ended the day up 9.44% or 0.66 points to $7.65, having soared as much as 25% during the session.

The Sage of Omaha may have earned as much as $1.3bn from his investment in the bank, as the preferred shares he bought are worth about $3.53bn, while warrants included in the deal are worth about $2.73bn based on a share price of $7.65, Bloomberg reports.

Buffett also earned a paper profit of $280m in just 24 hours following the bank's share price move, the Telegraph estimates.

Bank of America was the most heavily traded stock in the US this week since Citigroup before its reverse split in May, according to the FT.

Buffett said he is impressed the bank’s senior management are "acting aggressively to put their challenges behind them", adding he believes Bank of America is a “strong, well-led company.”

The deal sees the BofA selling 50,000 shares of cumulative perpetual preferred stock with a liquidation value of $100,000 per share to Berkshire Hathaway in a private offering.

The stock has a dividend of 6%, and can be redeemed by the company at any time at a 5% premium.

Other bank shares also jumped on the news: Citigroup closed 4.85% higher after an 8% rise, Wells Fargo rose 5% to $25.70 and ended the day 1.35% up, while and JPMorgan Chase rose 4.9% to $37.58, but closed 0.31% down.