Bank of America to sell stake in China Construction Bank for $6.6 bn

14 Nov 2011

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Bank of America Corp, the second-largest bank in the US by assets, will sell about 10.4 billion common shares of China Construction Bank Corp, for about $6.6 billion to strengthen its Tier 1 common capital ratio.

The shares which will be sold through private transactions with a group of investors, are expected to generate about $6.6 billion in cash and an after-tax gain of about $1.8 billion

The transaction, along with the related realisation of certain deferred tax assets, will generate about $2.9 billion in additional Tier 1 common capital at Bank of America.

Bank of America will hold about 1 per cent of CCB's common shares after the deal closes in November 2011.

"Our decision to sell the bulk of our remaining shares in China Construction Bank is consistent with our stated objective of continuing to build a strong balance sheet," said the Charlotte, North Carolina-based bank's CFO, Bruce Thompson.

"We expect this action, supplemented by the related realization of deferred tax assets, will generate approximately $2.9 billion in additional Tier 1 common capital and further strengthen our Tier 1 common capital ratio by approximately 24 basis points under Basel I," he added.

As part of its assets shedding plan, the bank early this month sold its stake in the largest Pizza Hut franchisee to a company formed by Olympus Partners, for a reported $755 million.

Earlier in August this year, the bank divested half of its  its 10-per cent stake to a group of investors for $8.3bn in cash (See: BankAm halves its stake in China's CCB, nets $8.3 bn)

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