Bank of America has agreed to sell 13 billion shares of China Construction Bank, or CCB, to a group of investors in a private transaction, generating $8.3 billion in cash proceeds and an after-tax gain of $3.3 billion. The sale, subject to customary conditions, is expected to close in the third quarter of 2011, the U.S. bank said in a statement.
The deal is intended to raise capital, helping BofA meet global banking regulatory standards, according to BofA CFO Bruce Thompson.
"This sale of approximately half of our shares of CCB stock is expected to generate about $3.5 billion in additional Tier 1 common capital and reduce our risk-weighted assets by $7.3 billion under Basel I," Thompson said in the statement.
After the sale, BofA will still own a 5 percent stake in CCB, a commercial bank in China that offers corporate and personal banking services, including infrastructure loans, residential mortgages and bank cards, according to the bank's English-language website. CCB has approximately 13,629 branches. BofA, by way of comparison, has 5,700 retail banking offices and approximately 17,800 ATMs.
Founded in 1954, CCB originally was a state-owned bank that administered and disbursed government funds for construction and infrastructure-related projects under China's state economic plan. The current corporation was formed as a joint-stock commercial bank in 2004 as a result of a "separation procedure," according to the website. Certain classes of the bank's shares were listed on Hong Kong Stock Exchange in 2005 and the Shanghai Stock Exchange in 2007.
CCB is also a big fish in the global banking pool. It ranks No. 108, roughly between Target Corp. and the U.S. Postal Service, on Fortune magazine's 2011 list of the world's 500 largest companies. BofA is a much bigger fish, ranking No. 21 on the global list, between General Motors and Samsung Electronics.
The news of the stock sale follows an announcement last week that mega-investor Warren Buffett had placed a big bet on BofA, which is still burdened by a large portfolio of problematic real estate loans, many of them home mortgages originated by Countrywide, a mortgage company BofA acquired during the financial crisis.
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