The sale has quelled fears that BoA’s shares would be dumped into the market.
Bank of America Corp. (BAC) agreed to sell about half its stake in China Construction Bank Corp. for a $3.3 billion gain as the biggest U.S. lender bolsters capital ahead of new international standards.
A group of investors will buy 13.1 billion shares this quarter in a private transaction that will generate $8.3 billion in cash proceeds, Charlotte, North Carolina-based Bank of America said yesterday in a statement, without identifying the buyers. The companies are also discussing an expansion of strategic ties.
Construction Bank shares jumped, heading for their biggest two-day gain in more than two years, after the U.S. firm said it would keep a 5 percent stake in the world’s second-biggest lender by market value. The partnership has been “mutually beneficial,” Bank of America Chief Executive Officer Brian T. Moynihan, 51, said in the statement.
“The sale has removed concern that BoA’s shares would be dumped into the market,” said Danny Yan, a Hong Kong-based portfolio manager at Haitong International Asset Management, which oversees $600 million. “A few investors were able to buy the shares, so it reduced market uncertainty about an oversupply.”
Moynihan has been selling businesses and assets as the firm seeks to comply with international capital standards set by the Basel Committee on Banking Supervision. The bank, the largest in the U.S. by assets, has slid 37 percent this year in New York trading amid investor concern that it may need to issue stock as mortgage-related losses deplete capital.
Selling the shares helps Bank of America raise capital to comply with tougher minimums that may be imposed by regulators as they try to prevent a repeat of the 2008 financial crisis. The CCB deal will generate about $3.5 billion in additional Tier 1 common capital and reduce risk-weighted assets by $7.3 billion under Basel I, Chief Financial Officer Bruce Thompson said in the statement.
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