Bank of America ups CCB stake

The Business Times
Published November 19, 2008
Bank of America ups CCB stake
Its shareholding has increased to 19.1% from 10.75%

(NEW YORK) Bank of America Corp said that it will boost its stake in China's third-largest bank, China Construction Bank Corp, to 19.1 per cent from 10.75 per cent.

Monday's decision should end speculation that surfaced earlier this year that Bank of America might sell some of its three-year-old investment to bolster its own capital, as losses mount from deteriorating consumer credit.

Bank of America said that it will increase its stake in China Construction Bank by exercising the rest of an option to buy shares from China SAFE Investments Ltd, a state investment arm.

Following the purchase, Bank of America would own 44.7 billion shares. The bank said that it expects to close the transaction this month, and 'remain a long-term and significant strategic investor' in China Construction Bank. The Chinese bank's market value is about US$126 billion, Reuters data show.

The investment has so far proven successful for Charlotte, North Carolina- based Bank of America, the third-largest US bank by assets.

Bank of America in June 2005 spent US$3 billion for a 9 per cent stake in the Chinese bank, and this July invested another US$1.9 billion. The US$4.9 billion total investment was worth US$14.5 billion as at Sept 30, Bank of America said.



Shares of China Construction Bank have risen 75 per cent since the bank's October 2005 initial public offering, despite falling by more than half from their October 2007 peak.

Bank of America announced the latest investment amid growing struggles at home. Last month, it cut its dividend in half after rising credit losses contributed to a 68 per cent decline in third-quarter profit.

The bank has already raised more than US$22 billion of capital this year, and is getting US$25 billion from the US$700 billion government package to shore up the financial industry.

Bank of America in July paid US$2.5 billion for Countrywide Financial Corp, the largest US mortgage lender.

It expects by year-end to complete its acquisition of Merrill Lynch & Co, the Wall Street investment bank and brokerage, in an all-stock transaction originally worth US$50 billion.

Shares of Bank of America fell 89 US cents, or 5.4 per cent, to US$15.53 in afternoon trading on the New York Stock Exchange. - Reuters