Bank of America Corporation (NYSE:BAC) has announced it intends to sell its entire stake in China Construction Bank Corp. (SHA:601939) (HKG:0939) for $1.5 billion. Bank of America Corp. (NYSE:BAC)’s stake accounted for less 1% of the second largest Chinese bank, according to a term sheet reviewed by AFP. The China Construction Bank China Construction Bank Corp. (SHA:601939) (HKG:0939) has a market value of $190 billion.
Bank of America wary of China’s deteriorating economic health?
Before today’s stake sale, Bank of America Corp. (NYSE:BAC) owned 2 billion Hong Kong-listed shares of CCB. The U.S. bank has priced its shares between 5.63 Hong Kong dollars and 5.81 Hong Kong dollars (73 to 76 U.S. cents). That’s lower than China Construction Bank Corp. (SHA:601939) (HKG:0939)’s closing price of HK$5.93 on Tuesday.
The Chinese lender recently announced a 13% increase profits for the first half of this year, helped rising commission and interest income. Economists and investors remain concerned over China’s worsening credit crisis and slowing economic growth. Bad debt levels are also expected to increase in the future. China Construction Bank Corp. (SHA:601939) (HKG:0939) said its bad debt level stands at 0.99%. The China Construction Bank shares have fallen 4.7% so far this year.
Bank of America made billions in profit
Bank of America Corp. (NYSE:BAC) acquired a 10% stake in China Construction Bank China Construction Bank Corp. (SHA:601939) (HKG:0939) in 2005 for about $3 billion. It sold most of its holding in 2011 in an attempt to shed non-core assets and boost capital. Bank of America Corp. (NYSE:BAC) made billions of dollars from its investment in China’s booming banking industry. Earlier this year, Goldman Sachs Group Inc. (NYSE:GS) exited its remaining stake in the Industrial and Commercial Bank of China Ltd. (SHA:601398) (HKG:1398) for about $1.1 billion. Goldman Sachs Group Inc. (NYSE:GS) had invested $2.6 billion in the Chinese bank. And sold that stake for more than $4.5 billion progressively.
Bank of America Merrill Lynch acted as the bookrunner of the stake sale. Bank of America Corp. (NYSE:BAC) shares jumped 1.56% to $14.34 at 9:45 AM EDT.
