Shares in Bear Stearns surged 8 per cent on Wall Street yesterday on rumours that America’s fifth-biggest bank is in serious talks over the sale of a 20 per cent stake to investors including Warren Buffett.

Almost three times the stock’s average daily volume of seven million shares changed hands yesterday, as investors sought to snap up the stock on hopes of an announcement of a successful stake sale.

A 20 per cent stake in the bank would have cost $3.6 billion (£1.8 billoin) at the closing share price on Tuesday evening, the day before the rumour surfaced.

It is thought that the Bank of America, Wachovia, the US mortgage lender, and two Chinese groups, Citic Group and China Construction Bank, were also interested in grabbing a stake in Bear Stearns.

Although it is not known how any consortium of investors would hold the stake, some on Wall Street have speculated that it could mimic Bank of America’s cash injection into Countrywide, America's biggest mortgage lender.

In August, Bank of America bought Countrywide convertible bonds that represent a 16 per cent stake, once exercised. Although Mr Buffett has also been rumoured to be preparing to take a stake in Countrywide, over the summer he bought 8.7 million shares — about 0.2 per cent — of Bank of America.

Bear Stearns is in a vulnerable state. This summer it confessed that two hedge funds it ran lost $1.5 billion collectively.

The funds made the losses because the value of some bonds — backed by sub-prime mortgages — plunged as America spiralled further into a housing recession.

Bear Stearns was forced to close the funds. The admission hit the bank’s share price, which lost a third of its value in a few months.

This month the bank disclosed its worst quarterly profit in five years, reporting a 61 per cent drop in third-quarter net income to $171 million, hit by the $200 million charge relating to the collapse of the hedge funds.

Mr Buffett would not be the first investor to seek to seize a stake in the bank in its present predicament.

This month Joe Lewis — the Bahamas-based investor and backer of Tottenham Hotspur, the Premier League football club, acknowledged that he had quietly accumulated a 7 per cent stake in the bank.

Since the bank’s troubles emerged, Wall Street has speculated that it is vulnerable to a friendly takeover. However, it is thought that the group’s chief executive, James Cayne, who is also one of the biggest single shareholders in the bank, has been holding out for a big premium in the event of a takeover approach.

It is thought that Mr Cayne has insisted that any sale price would have to value the bank at more than 40 per cent of its current market capitalisation.

Rumours surfaced yesterday suggesting that Mr Cayne had lowered his sights and would be prepared to negotiate for a 20 per cent premium.

In 1987 Mr Buffett took a 12 per cent stake in Salomon Brothers, now owned by Citigroup, to fight off an unwelcome approach by the financier Ronald Perelman.

Mr Buffett became chief executive of the bank in 1991 as it became embroiled in a Treasury bond-trading scandal.

Bear Stearns did not return calls and Mr Buffett’s investment vehicle, Berkshire Hathaway, declined to comment.

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