BofA Strikes Pact to Sell Half of CCB Stake

By DAVID BENOIT And LAUREN POLLOCK

Bank of America Corp., making yet another significant move to boost its capital position, has agreed to sell half of its stake in China Construction Bank Corp., booking a $3.3 billion gain.

The move, long anticipated by analysts and investors, is the latest step by Chief Executive Brian Moynihan to sell what he has deemed noncore assets, allowing the bank to boost capital and lower its asset levels. Combined, those steps march the nation's biggest bank by assets and deposits closer to meeting global liquidity standards that take effect in the coming years.

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Investors have recently expressed concern over the Charlotte, N.C., bank's ability to meet those rules, sending shares falling. But the bank has now made several moves over the past few weeks to assuage those concerns, including selling its consumer credit-card unit in Canada and raising $5 billion from Warren Buffett's Berkshire Hathaway Inc.

Shares rose 5.3% to $8.17 in recent trading. They remain down 16% this month and 39% this year, but have climbed back from a low of $6.01 a week ago. Since Mr. Buffett investment was announced, the bank has recovered more than $11 billion in market capitalization.

The deal for about 13.1 billion common shares, at a pre-tax total of $8.3 billion, is expected to close in the third quarter. Bank of America will retain a stake of about 5% in CCB.

The buyer wasn't disclosed, but Singapore state investment company Temasek Holdings Pte. Ltd. was considering acquiring a part of the stake, people familiar with the situation said.

Last week, the Chinese lender hinted the possibility of Bank of America reducing its stake and CCB unveiled plans to raise 80 billion yuan (US$12.5 billion) to boost its capital base.

The banks remain in discussions about potentially expanding and extending a strategic agreement that isn't contingent on the stake.

Bank of America first got its stake in CCB before CCB's initial public offering in 2005, a time when many U.S. banks flocked to get a share of newly open Chinese banks.

Bank of America Chief Financial Officer Bruce Thompson said the sale is expected to generate about $3.5 billion in additional Tier 1 common capital, the strictest definition of capital, and reduce its risk-weighted assets by $7.3 billion under Basel I.

The latest Basel accord, the third edition, requires the world's biggest financial institutions to hold enough Tier 1 common equity equal to 9.5% of its risk-weighted assets by 2019.

In total this month, the bank has now raised $5.8 billion in Tier 1 common capital and reduced the risk-weighted assets by $16.1 billion under the Basel I terms.

Bank of America had long been expected to consider the CCB stake a noncore asset. Late last year it sold its right to purchase additional shares to Temasek. It remains committed to selling other private equity units and mortgage-servicing rights to raise additional funds.

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