Bank of America (BofA) could soon sell shares in China's second-largest bank as part of a move that could likely fetch about a quarter of the US$34 billion in additional capital it is reported to need after a US government stress test.
BofA is allowed to sell 13.5 billion shares in China Construction Bank (CCB) - a 6 percent stake worth around US$8.3 billion - when a lock-up period ends today.
CCB Shares fell as much as 4.4 percent in early trading yesterday in Hong Kong due to fears of a possible BofA stake sale and ended at HKUS$4.75, down 0.42 percent.
BofA had reportedly been preparing for an immediate share sale as soon as the lockup period expired.
An official at CCB's public relations office said the bank hadn't received any notice regarding the US bank's plan to sell part of its holdings. "Share sale following the expiration of a lockup period is a normal act by strategic investors. The long-term strategic cooperation between the two banks will not change," said the CCB official.
BofA had said it intends to remain a long-term and strategic shareholder of CCB, the Financial Times reported.
Western financial institutions have been selling their stakes in Chinese banks to replenish capital that dried up following the global credit crisis. BofA has been one of the hardest hit banks in the US. The bank has already raised US$2.8 billion selling CCB shares at a 12 percent discount in January.
Allianz SE and American Express sold a combined US$1.9 billion of shares in Industrial and Commercial Bank of China at a 4 percent discount last week. Royal Bank of Scotland and UBS both sold their entire stakes in Bank of China in January.
However, the decision by foreign strategic investors to sell or hold their stakes mostly depends on their own performance, analysts said.
Goldman Sachs, the US investment bank that posted a 12.9 percent 2009 first quarter net profit growth, agreed in March to keep 80 percent of its almost 16.5 billion shares in ICBC for at least another year.
CCB's Hong Kong listed H-shares have gained 11.5 percent this year. The bank said in April that its 2009 first quarter net profit fell 18.3 percent from a year earlier as narrowing interest margins hurt profitability.
(China Daily May 7, 2009)
