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Buffett's Two Irish Bank Investments

  • Investing
  • Buffett
  • Case Studies
  • Investment Failures

Berkshire spent $244 million on two Irish bank stocks in 2008; their year-end value was just $27 million. Buffett acknowledged misjudging their apparent cheapness. The year-end marks illustrate how deteriorating bank assets can rapidly erode equity value.

Source dates and applicability

Purchases and year-end valuations refer to 2008; the reporting-year letter is signed February 27, 2009. Background uses a 2012 speech and a 2020 BIS retrospective. As of October 2026, the case remains relevant to bank asset quality and equity risk. The year-end mark is not necessarily a final realized loss, and the letter does not identify the two banks.

Investment Outcome

Buffett bought shares in two Irish banks in 2008. Berkshire invested $244 million in total that year, but by the end of 2008 the holdings were worth just $27 million, an unrealized loss of nearly 89%.

1. What He Saw at the Time

Buffett did not name the two banks directly in official documents, but they are generally thought to have been Bank of Ireland and Allied Irish Banks.

What Buffett saw at the time was two bank stocks with very low valuations. In the 2008 annual report, he said they “appeared cheap to me.”

The purchase reflected his low-valuation judgment. Subsequent losses show that this judgment did not sufficiently allow for further deterioration in asset quality.

Behind the two banks’ low valuations, however, Ireland’s entire credit expansion cycle had entered a dangerous stage.

Ireland experienced a powerful property and credit expansion from the late 1990s through 2006. Allied Irish Banks also acknowledged in its historical material that deep involvement in Irish property was an important part of its market positioning before the crisis. As house prices rose, mortgage and property development lending expanded rapidly.

By 2008, residential and commercial property prices were falling, construction was slowing, and banks faced clearly increasing bad-debt pressure in construction, property, and residential mortgages. Funding and liquidity were also beginning to deteriorate.

2. Systemic Problems Set Off a Chain Reaction

On September 30, 2008, the Irish government announced a two-year guarantee covering almost all the liabilities of domestic banks.

The Bank for International Settlements (BIS) summarized the episode by noting that the guarantee covered almost all bank liabilities, approximately €375 billion, more than twice Ireland’s GDP at the time.

It eased liquidity pressure in the short term but did not truly restore market confidence. Bank share prices continued to fall, and doubts about the true quality of their assets deepened.

In December 2008, the Irish government initially proposed injecting €2 billion each into Allied Irish Banks and Bank of Ireland. By February 2009, as asset values continued falling and nonperforming loans continued rising, it increased the injection to €3.5 billion for each bank.

3. Why the Investment Lost So Much

In his 2008 shareholder letter, Buffett acknowledged that this investment was among his unforced errors: mistakes entirely of his own making, without external pressure.

Berkshire spent $244 million buying shares in these two Irish banks in 2008, but their market value was just $27 million at year-end. He also said both stocks were still falling as he wrote the letter.

What makes this mistake worth remembering is that he treated a sufficiently cheap price as a cushion against continuing deterioration in asset quality.

But in banking, if the underlying assets keep deteriorating, a stock that looks cheap on paper may not truly be cheap, and a low price does not necessarily mean the risks have been fully worked through.

References