DJ UPDATE: Bank Of America May Sell Part Of China Bank Stake
By Daniel at 9 October, 2008, 8:33 am
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HONG KONG (Dow Jones)–Bank of America Corp. (BAC), which has just completed a US$10 billion stock offering to shore up its finances, said late Wednesday it is committed to keeping a “major” part of its 10.8% stake in China Construction Bank Corp. (0939.HK).
The comment suggests the biggest U.S. bank by market value and deposits may sell a small part of its holding when the lockup period for 19.1 billion of the 25.1 billion shares it owns in China’s second-largest bank by assets, which is still up 73% from its initial public offering price despite declining sharply this year, expires Oct. 27.
“We intend to keep a major stake in China Construction Bank going forward,” Bank of America spokesman Robert Stickler said, adding that the bank hasn’t discussed whether it may sell part of the holding.
He said the bank’s future holding “wouldn’t be significantly lower” than the existing stake.
Taking profit on part of the stake would help the U.S. consumer-banking giant prop up its capital base after its recent acquisitions, including the US$44 billion purchase of Merrill Lynch & Co.
At the midday close, China Construction Bank was 4.4% higher at HK$4.07, sharply up from the IPO price of HK$2.35. At Thursday’s midday price, the shares to be unlocked later this month would be worth US$6.99 billion.
Bank of America agreed to buy the 19.1 billion shares in a deal signed ahead of the Chinese bank’s initial public offering.
It bought 17.5 billion shares for US$2.5 billion just prior to China Construction Bank’s US$8 billion H-share offering in October 2005 and subscribed to another 1.66 billion of shares in the IPO for US$500 million. It raised its stake in May to 10.8% by buying another 6 billion shares for US$1.86 billion.
China Construction Bank’s shares are down 38% since the beginning of the year, compared with a 32.5% decline on Hong Kong’s benchmark index.
Bank of America has over the past week employed various measures, including slashing its quarterly dividend by half and raising US$10 billion via a secondary share offering, in the hope of riding through the current banking crisis.
China Construction Bank, which is China’s second-largest lender after Industrial & Commercial Bank of China Ltd. and also 5.7%-owned by Temasek Holdings Pte. Ltd., declined to comment on the matter.
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