Paulson gambles on US banking revival

HIGH-PROFILE hedge fund manager John Paulson has taken a bet of more than $2.5bn (&pound;1.5bn) on the recovery of US banks, handing a vote of confidence to a beleaguered Wall Street.<br /><br />Regulatory filings with the US Securities and Exchange Commission (SEC) show that Paulson bought 168m shares in Bank of America (BoA) during the second quarter, building a stake worth $2.2bn as of 30 June.<br /><br />His BoA shares look set to net him a tidy profit, with last night&rsquo;s closing price valuing his holding at $2.86bn, a $660m paper profit since the end of the last quarter.<br /><br />Paulson&rsquo;s purchase of shares in BoA will make him the bank&rsquo;s fourth-largest shareholder, with a 1.94 per cent stake in the bank.<br /><br />Traditionally, Paulson has been a quiet investor, but he could use his stake in the bank to exert pressure on chief executive Kenneth Lewis, who has already been removed as chairman by shareholders.<br /><br />The hedge fund guru, who notoriously made $3.7bn betting against the US sub-prime mortgage market, also bought 2m shares in Goldman Sachs and watched their value soar from $295m at the end of June to $329m as of last night.<br /><br />In a further sign of his confidence in a banking recovery, Paulson also became the second-largest shareholder of Regions Financial with the purchase of 35m shares, and the fifth-largest investor in Capital One Financial, with 17m shares.