BoA could use the proceeds to comply with tougher capital requirements that may be imposed by regulators for prevention of a repeat of the 2008 financial crisis.
Bank of America Corp. (BAC) may sell some of its $21 billion stake in China Construction Bank Corp. to bolster capital before new international standards take effect, said three people briefed on the plans.
Bank of America, the biggest U.S. lender by assets, wants to keep about half its CCB shares so it can remain a strategic investor in the world’s second-biggest bank by market value, said two of the people, who declined to be identified because the plans are private. CCB led declines among Hong Kong-listed Chinese banks on Monday.
“This is obviously a forced sale -- it’s a big chunk of a valued enterprise in an attractive place in the world,” said Greg Donaldson, chairman of Evansville, Indiana-based Donaldson Capital Management, with $465 million in assets, including Bank of America shares. “It’s a relatively poor time to be selling because the Chinese stock market hasn’t done well recently.”
Selling the shares could help 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 Basel Committee on Banking Supervision is considering plans that may include a surcharge on the largest lenders, people briefed on those talks have said.
Shares of CCB dropped 3 percent in Hong Kong as of midday trading break, extending its decline this year to 8.3 percent. Still, that values the Beijing-based company at about $205 billion, a more than threefold increase from its market capitalization at the time of its October 2005 initial public offering in Hong Kong.
Bank of America, which began investing in CCB before the IPO, owned 25.6 billion shares valued at $21 billion as of March 31, the Charlotte, North Carolina-based lender said in a May regulatory filing. The stake, which is the U.S. bank’s largest holding by market value, equals about 10.6 percent of CCB’s Hong Kong-listed shares, according to Bloomberg data.
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