Bank of America Corporation has agreed to sell approximately 13.1 billion common shares of China Construction Bank Corporation (CCB) in a private transaction with a group of investors. The sale is expected to generate approximately $8.3 billion in cash proceeds and an after-tax gain on sale of approximately $3.3 billion.
The transaction is expected to close in the third quarter of 2011, and is subject to customary closing conditions. Following closing, Bank of America will hold approximately 5 percent of CCB.
“Our partnership with China Construction Bank has been mutually beneficial,” said Bank of America Chief Executive Officer Brian Moynihan. Bank of America and China Construction Bank are discussing a potential expansion and extension of the existing strategic assistance agreement.
“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,” said Chief Financial Officer Bruce Thompson. “This month alone, through non-core asset sales and other actions, we expect to generate approximately $5.8 billion in additional Tier 1 common capital and reduce risk-weighted assets by approximately $16.1 billion under Basel I.”
The current proposed Basel III standards place restrictions on capital that represents ownership in financial institutions above 10 percent. The sale of CCB shares announced today would put Bank of America’s ownership in CCB below 10 percent and would remove the significant investment in financial institutions deduction from the company’s Tier 1 common capital under Basel III associated with this CCB stake.
The transaction was solely managed by Bank of America Merrill Lynch.