Bank Of America Sells Half Of Stake In Chinese Bank In Preparation For New Regulations

NEW YORK — 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.

Comments

[james rimes]

10:59 AM on 08/30/2011

1977 BofA issues the first Private Label MBS... 2007 They need a bailout for the maturity of their exercised interest...Go Figure..

[AggieReal]

12:28 AM on 08/30/2011

I so hate BofA that I wish the settlements would put them out of business once and for all.. I would rather pay my loan to a Chinese bank than this slimy crooked outfit.

[bejayech]

11:53 AM on 08/30/2011

Be reasonable now...that would be another 360,000 workers out of a job, many of them liberal.

[TeddyS31]

03:52 PM on 08/30/2011

I would prefer berkshire purchasing boa and redo the bank and keep 80% of the jobs

[Dianne93101]

12:14 AM on 08/30/2011

my theory is that sub-prime mortgages were doled out for a combination of reasons, the obvious reason is political gain benefiting the partnership BIG BANKS and their favorite politicians (who have grateful homeowners re-electing them). The process is complicated in that you have these regs that make the banks offer the loans, which eventually caused the crash bringing the weaker ones down. So as a result you get BIG fish eating little fish and the BF gets fed with TARP along with enough spin on the hows and whys of their crisis to sail them through the questioning.
In the infancy of FDR's long term he loaned out $$ to banks, who he eventually forgave when they just couldn't pay it back. It's not so easy now so the forementioned modus operadi was the way for the bank monopolies.
Bottom line, if you love America, take your money out of the biggest banks, at least the ones that have gobbled up the little banks.

[matcyn]

12:12 AM on 08/30/2011

This time they should pay us.

[knezrad]

12:04 AM on 08/30/2011

If the big problem for BoA is the AIG suit, it is apropos for Mr. Buffet's Berkshire Hathaway to shore it up, since that group owns so much of AIG. It is not necessarily a good idea for it to be so good a deal for BH's "new" investors however and the entire thing should be investigated. It scents of being a complex accounting dodge allowing the losses AIG makes up and the lawsuit costs and the selloff of stock undervalue to post ostensible losses for tax purposes thereby defrauding the government.

[Wingit]

02:37 AM on 08/30/2011

If you want to complicate it more, BH also owns Wells Fargo. Yet, Buffet is lending money to BOA. He might be trying to keep BOA afloat so it does not get rolled into Wells Fargo.
Merril Lynch and Countrywide were never sought entities by BOA. They were forced on BOA by the administration that was in office at the time.

[Graham Smart]

03:31 AM on 08/30/2011

BofA may have been "encouraged" to take on Merril but Ken Lewis actively sought to acquire Countrywide to make BofA the largest home loan lender in the US.
"By Steven Mufson The Washington Post
WASHINGTON — When Bank of America agreed to buy Countrywide Financial for $4 billion in January 2008, the bank's chief executive, Ken Lewis, called it a "one-time opportunity.".......
http://o.seattletimes.nwsource.com/html/realestate/2013641713_realcountrywide12.html

[kwidge]

11:59 PM on 08/29/2011

If the goverment gave me 45 billion dollars charged me 2 % interest, but i make say 5 % interest just by having it of course I'd take it. Pay it back and keep the 3% for myself. I wonder if my local bank would go for that?

[kwidge]

11:54 PM on 08/29/2011

BOA may have paid back the money, but how much intrest did they make just by having the bailout money?

[Graham Smart]

03:40 AM on 08/30/2011

They paid back the $45Bn TARP funds now what about the $1.344 trillion dollars they have had at 0% interest in the Federal Reserve's "all-inclusive loan program".?
http://www.unelected.org/audit-of-the-federal-reserve-reveals-16-trillion-in-secret-bailouts
http://www.scribd.com/doc/60553686/GAO-Fed-Investigation#outer_page_144

[Dianne93101]

11:51 PM on 08/29/2011

whoever rated the bundled mortgage "securities" as AAA should be the one getting sued because most investors bought into the hype because of it, especially foreign ones, i.e. Icelanders

[joeshop8]

12:22 AM on 08/30/2011

If You get a chance watch MSNBC segment called House of Cards with David Faber. It will answer that very question. Its about 2 hours, well worth the time.

[mistergg69]

11:14 PM on 08/29/2011

Wall street banksters caused the Great Recession

[mistergg69]

11:10 PM on 08/29/2011

Wall street banksters are going after each other for billions...I guess all the money the tax payer gave them wasn't enough to satisfy their greed

[A George]

11:06 PM on 08/29/2011

Hey all of you out there that are bad mouthing B of A. Did they drag you off the street and force you to open a checking or savings account? Or did they stgrong arm you to open a credit card with them? Now if your mortgage was sold to them that is a different story, but why would you open an account with someone you do not like? I think it is becuase some people on here just love to bad mouth the big guys. Did you read that about half of the people in U.S. have accounts with B of A? That means for every idiot that cries about them there are about 199 people who are happy with them. It is only the losers who cannot handle their own finances that cry crocodile tears. Most of B of A's problems now are because of Countrywide, a company they had nothing to do with during the mortgage fiasco. Grow up cry babies.

[joeshop8]

12:24 AM on 08/30/2011

Good call!!

[racings12a]

01:57 AM on 08/30/2011

I beg to differ with you. I know how to handle my finances and am here to complain about them. I do have money in Bank of America and the major reason is I traveled a lot with my work and there was a Bank of America on just about every corner in every state. Convenience. I also opened a savings account I am going to close because last month I got a whopping 10 cents in interest on $2,500 that was in the account. They take our money and are making an 8% return on it and only 5/100 of a % back to us. I call it stealing if you ask me. You say most of their problems are because of Countrywide. They knew of the problems before they plunked down the $4.1 billion to buy them the had 4 months to change their mind before the sale became final in July 2008 then wanted to cry when the bottom fell out. I think old Amadeo Giannini who founded the bank back in 1904 would turn over in his grave if he saw what was going on today.

[Wingit]

02:46 AM on 08/30/2011

Everyone knew of the Countrywide problem, including the politicians. They coud not let Countrywide go bankrupt, so they had to "put" it somewhere and BAC was the chosen victim. So, somehow, I don't think you will ever see BOA go out of business.

[A George]

12:16 PM on 08/30/2011

A.P. Founded B of A in 1904 as the Bank of Italy in the North Beach district of San Francisco. He believed in customer service. As for your whopping savings interest I do not get much more than that at my credit union. But you maintain a checking account with them for the purpose of YOUR convenience. You have the need for a large bank yet you bad mouth them. Why don't you deal with a credit union? If you do not like B of A, don't deal with them. You sir are one grand hypocrit.

[yovinny100]

10:44 PM on 08/29/2011

$3.3 billion. Remember that when they jack up your credit card's interest rate again.

[kpamesa]

09:42 PM on 08/29/2011

Guess we should start "following the money trail"..... charge the bank customers for every little teeny transaction, but don't put that money to good use here in AMERICA, rather "invest" in offshore (read China) banks. Glad I don't have any dealings with these crooks...........

[grizzly bear55]

10:01 PM on 08/29/2011

They made $3.3 billion profits after paying taxes to the United States Government, plus the $8.5 billion are back to the US.

On the other hands, they are losing $billions because people are not paying their mortgages and they never complained about it.

[racings12a]

02:41 AM on 08/30/2011

There's a good reason they shouldn't complain, they knew before they bought all these mortgages there was a problem with them and still bought the firm that held them.

[brokerallen]

09:29 PM on 08/29/2011

Bank of America is still devious. They are charging a $5.00 fee to cash a check drafted against their bank. I haven't seen this covered in the media.

[Steven Mackey]

09:42 PM on 08/29/2011

Most banks do that now.

[Steven Mackey]

09:42 PM on 08/29/2011

Some banks even charge account holders to use their atms

[racings12a]

02:44 AM on 08/30/2011

I set up my account to use the ATM only. If I used the inside tellers more than 3 times a month they would charge me, so if the then start charging me to use the ATM there tellers will get a workout and if they say anything I can always find another bank.

[LATEACHER1X]

11:54 AM on 08/30/2011

Go credit union! Boycott B of A.

[wllharrington]

08:28 PM on 08/29/2011

When did BofA buy the Chinese bank and where did they get the money? If I recall correxctly they were crying poverty and were given an enormous sum by the US Government to bail them out. Did they use this money to buy the Chinese bank?

[grizzly bear55]

09:59 PM on 08/29/2011

The bailout money was forced on them by the Government to stop on run on deposits which is the right way to do it.

I have large investments with BAC and I find them like any other bank, I do not borrow money, so I would not get to bash the bank like most posters who would love not pay back the money or any fees as of the bank is the salvation army.

[A George]

11:08 PM on 08/29/2011

They paid that back years ago WITH INTEREST! Have you been asleep or do you only swelelctively remember events???

[Graham Smart]

03:43 AM on 08/30/2011

They paid back the $45Bn TARP funds now what about the $1.344 trillion dollars they have had at 0% interest in the Federal Reserve's "all-inclu­sive loan program".?
http://www­.unelected­.org/audit­-of-the-fe­deral-rese­rve-reveal­s-16-trill­ion-in-sec­ret-bailou­ts
http://www­.scribd.co­m/doc/6055­3686/GAO-F­ed-Investi­gation#out­er_page_14­4