BofA falls on non-disposal of full China bank stake
Published 23/08/2011 | 05:00
BANK of America led decliners in the Standard & Poor's 500 Index after China Construction Bank said the US lender will keep at least half its stake, spurring new debate on the American firm's capital plans.
Bank of America slipped 30 cents, or 4.3pc, to $6.67 in New York Stock Exchange trading and sold for as little as $6.51.
The lender, the biggest in the US, agreed to retain at least half its 10pc holding, China Construction president Zhang Jianguo told reporters in Hong Kong. Some analysts had estimated the bank would divest all of its shares.
Bank of America CEO Brian Moynihan (51), has been selling businesses and assets as the firm seeks to comply with new international capital standards set by the Basel Committee on Banking Supervision. Last week the company announced it was exiting credit-card markets outside the US, including the sale of MBNA in Ireland.
Moynihan's company has lost about half its market value this year, as costs tied to the 2008 acquisition of subprime lender Countrywide Financial weighed on capital and sparked speculation that the firm would have to issue new stock.
Bank of America owned 25.6 billion shares valued at $19.6bn as of June 30, the lender said in an August filing.
China Construction, the world's second-largest lender by market value, said it's discussing a strategic co-operation agreement with Bank of America after extending an existing accord to the end of 2012.
The lenders may work together on retail and corporate operations, as well as wealth management and investment banking, the bank told reporters in Hong Kong today. A separate agreement that bars Bank of America from selling most of its stake is set to expire on August 29.
"Bank of America will be a long-term strategic partner and a major shareholder," Chairman Guo Shuqing said yesterday in Beijing. The US lender has improved its capital adequacy ratio and will overcome other difficulties, he said.
Jerry Dubrowski, a Bank of America spokesman, said the bank doesn't comment on the stock price. As for China Construction, the two banks have a long-term strategic partnership, Dubrowski said via email. "We look forward to expanding and extending that relationship, which has been very positive for both companies," he said. (Bloomberg)