BofA rises as firm seeks $1.5B in Construction Bank exit
BANK OF AMERICA CORP. is looking to sell its remaining stake in China Construction Bank Corp. for $1.5 billion, ending its eight-year investment in the bank. New regulations would put greater strain on BofA's balance sheet.
BLOOMBERG FILE PHOTO/DANIEL ACKER
By Hugh Son and Stephanie Tong Bloomberg News
NEW YORK - Bank of America Corp. rose in New York trading after setting a $1.5 billion goal for its sale of China Construction Bank Corp. shares, a deal that will end an eight-year investment in the Chinese lender.
Bank of America climbed 1.6 percent to $14.34 as of 10 a.m. The lender is offering its remaining 2 billion Construction Bank shares for HK$5.63 to HK$5.81 each, according to terms for the deal obtained by Bloomberg News. That’s as much as 5.1 percent below the closing price in Hong Kong for Beijing-based CCB, ranked second by market value among Chinese banks.
Goldman Sachs Group Inc., HSBC Holdings PLC and Citigroup Inc. also have sold shares in Chinese financial institutions as new international rules make it more expensive to hold minority stakes in lenders. Bank of America reaped at least $15 billion in sales proceeds and dividends before today, according to Bloomberg calculations based on its filings.
“Stake sales are a prudent move,” Sandy Mehta, CEO of Value Investment Principals Ltd. in Hong Kong, said via email. BofA’s sale continues the trend of “Western banks selling down stakes and raising capital wherever and whenever they can,” he wrote.
Mark Tsang, a spokesman for Bank of America in Hong Kong, declined to comment. The second-biggest U.S. lender, based in Charlotte, N.C., sold Construction Bank shares four times before the latest transaction. It paid $3 billion for a 9.9 percent stake in Construction Bank before its initial public offering in 2005, and later exercised an option to buy another 11 percent for about $9.2 billion.
Not including Bank of America’s CCB sale, foreign institutions have raised at least $14 billion from divesting shares in Chinese financial firms since the start of 2012, according to data compiled by Bloomberg.
New rules set by the Basel Committee on Banking Supervision require capital deductions for holding minority investments in other financial institutions.