Bank of America sells half of its China bank stake

August 29, 2011 - 1:20 PM
Bank of America Asset Sale

FILE - In this file photograph taken Jan. 20, 2011, Bank of America's corporate headquarters is shown in Charlotte, N.C. Bank of America Corp. on Monday, Aug. 29, 2011, said it is selling half of its stake in China Construction Bank Corp. in a move intended to raise cash to shore up its capital base. (AP Photo/Chuck Burton, File)

NEW YORK (AP) — Bank of America Corp. is selling half of its stake in China Construction Bank Corp. to raise cash and shore up its capital base.

The nation's largest bank by assets said Monday it will sell 13.1 billion shares in the Chinese bank for $8.3 billion to a group of investors it declined to name. The sale, which had been expected, will generate a gain of $3.3 billion for Bank of America.

The news came four days after the Charlotte, N.C. bank got a $5 billion investment from Warren Buffett's Berkshire Hathaway Inc., which provided a big boost to Bank of America's battered stock. The billionaire investor made investments in other major companies such as Goldman Sachs Group Inc., helping restore confidence in them when they were out of favor.

Bank of America rose 40 cents, or 5.2 percent, to $8.16 Monday after news of the sale came out. The stock closed at $6.30 last Tuesday, two days before Berkshire announced its investment.

After the sale, Bank of America will still own about 5 percent of China Construction Bank. It currently owns about 10 percent.

The sale is the bank's latest move to increase its capital base to comply with new international regulations created following the global meltdown. The rules require big financial institutions to hold more cash.

Finance Chief Bruce Thompson says the bank raised about $5.8 billion in August. That comes on top of cash and cash-equivalent securities of $402 billion at the end of second quarter.

The bank has faced many problems stemming from its 2008 purchase of the nation's largest mortgage lender, Countrywide Financial Corp., as well as other issues. Bank of America has lost $15.3 billion in the last four quarters. Its revenue fell 34 percent in the first half of 2011 compared with last year after new regulations cut into the fees it collects from checking account overdrafts and credit cards.

Half of all U.S. households have an account or do business with Bank of America, making it more exposed than its rivals to weakness in the economy.

On Aug. 8, American International Group Inc. sued the bank for more than $10 billion, claiming Bank of America deceived the insurer by selling it faulty mortgage investments. Bank of America has already paid a total of $12.7 billion this year to settle similar claims, but that suit increased worries that more investors would sue and further drain the bank's cash reserves.