Monday 4 December 2023

BofA talks to Gulf funds on CCB stake sale

New York, August 11, 2011

Bank of America Corp has held exploratory talks with the principal investment funds of Kuwait and Qatar about selling part of its $17 billion stake in China Construction Bank, sources with direct knowledge of the talks told Reuters.

Bank of America, which owns about 10 percent of CCB's  Hong Kong-listed shares and is scurrying to raise capital for its mortgage-scarred balance sheet, will be contractually free to sell the bank shares after August 29.     

BofA, the largest US bank by assets, is likely to sell half its stake to shore up its Tier 1 capital, one of the sources said. Analysts believe Bank of America needs about $50 billion to meet new capital requirements.      

Talks about the Chinese bank have been held with other investors in addition to the Kuwait Investment Authority and the Qatar Investment Authority, the sources said.

If successful, the move to sell the shares to the sovereign wealth funds will alleviate concerns that BofA will be selling the stake in the open market through a block deal.

Shares of CCB rose as much as 4 percent, bucking a fall in the benchmark Hong Kong share index , as traders cut short positions and bet the huge overhang would now not have to be absorbed on the market.     

'The market must be thinking that BofA is going to unload their entire stake to Middle Eastern SWFs without showing anything to the street,' one Hong Kong-based trader said.

Shares of the Chinese bank have fallen some 20 percent, partly in anticipation of a BofA sale, traders said.

The stock was up 1.3 percent at the mid-session break compared with a 1.5 percent fall in the benchmark index. It was unclear if any agreement with the sovereign wealth funds or other investors have been cemented. Sources said no talks are being held currently.

Bank of America, whose shares have fallen 27 percent in the past week, did not mention the China investment during a widely followed conference call that top executives held on Wednesday with thousands of investors. Chief financial officer Bruce Thompson said on the call that asset sales are being considered to boost capital.   

'These stakes will be sold eventually,' a second source said of the Chinese bank shares. 'They have been shown previously to funds who matter.'     

Bank of America spokesman Jerry Dubrowski declined to discuss whether negotiations have been held, and officials at QIA and KIA were not immediately available for comment.     

'We continue to be a significant shareholder in CCB and we intend to continue the important long-term strategic alliance with CCB originally entered into in 2005,' Dubrowski said. - Reuters    

Tags: Qatar | Kuwait | KIA | QIA | Bank of America | Gulf funds |

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