It is scant surprise that Bank of America has, finally, sold an eighth of its stake in China Construction Bank. The sale raises $2.8 billion — $1.1 billion of it profit on paper — and BofA needs the cash to recapitalize its balance sheet and help pay for the merger with Merrill Lynch. China Construction says it understands (statement in Chinese).
BofA will be careful to cast the sale in just such a light, and still holds a 16.6% stake in China’s second-largest commercial lender by assets. As we’ve noted before, Beijing isn’t too thrilled to have what were meant to be foreign-owned strategic stakes in three of its largest banks being flogged off.
UBS has sold off its holding in Bank of China, and Royal Bank of Scotland and the Singapore sovereign fund, Temasek may follow suit. IPO lockups lapsed at the end of last month. Lock ups in Industrial and Commercial Bank of China, in which Goldman Sachs and American Express hold stakes, lapse in April and October. All the foreign banks need to raise capital from wherever they can.
And they are being joined by Li Ka-shing, who, Bloomberg reports, wants to sell $500 million worth of shares in Bank of China.
Back with China Construction, we assume that BofA has got round the provisions of China’s securities law that have previously held back the sale. Those ban investors holding more than 5% of a locally incorporated, publicly traded company from selling shares within six months of buying the stock. BofA’s first stake was taken in 2005 but the most recent shares were acquired only last November.