In the last three months, the largest U.S. bank has agreed to sell nearly $15 billion of CCB shares, a holding originally acquired to cement Bank of America’s strategic relationship with CCB and give it a stake in China’s growing economy.
The Charlotte, North Carolina-based bank is under pressure to build capital to cover mortgage-related assets and to meet new international standards.
The private sales announced on Monday — to a group of investors — are expected to generate a gain of about $1.8 billion after taxes, Bank of America said in a statement.
The income will allow the bank to realize deferred tax assets, boosting a measure of capital known as tier 1 common capital by about $2.9 billion.
In August, Bank of America agreed to sell $8.3 billion worth of CCB shares to a group of investors. After those sales, the bank still owned 12.5 billion CCB shares, or about a 5 percent stake, according to its latest quarterly filing.
The bank was entitled to sell 10.5 billion of those 12.5 billion shares, with the remaining 2 billion shares having sales restrictions until August 2013.
Bank of America said it will continue to hold about 1 percent of CCB’s common shares after the latest sales close this month.
Bank of America still has an agreement to cooperate with CCB through 2016 in areas including investment banking.
Bank of America first invested in CCB in 2005 under Chief Executive Ken Lewis. Since taking over in January 2010, Lewis’s successor, Brian Moynihan, has been selling off assets to streamline the bank and fortify its balance sheet.
“Our decision to sell the bulk of our remaining shares in China Construction Bank is consistent with our stated objective of continuing to build a strong balance sheet,” Chief Financial Officer Bruce Thompson said in a statement.
The CCB sales in August helped return the bank to profitability in the third quarter.
Reporting by Rick Rothacker in Charlotte, North Carolina; Additional reporting by Brenton Cordeiro in Bangalore and Dan Wilchins in New York; Editing by Supriya Kurane, Derek Caney and John Wallace