Bank Of America Is Selling CCB AGAIN15 November, 2011, 0:11. Posted by Zarathustra
Tags: Bank of America, China Construction Bank
Chinese banks are disliked here, as pointed out for numerous times that the view here is that when economy slows and asset quality declines, banks share capital could become out-of-the-money call options on banks’ assets. For Chinese banks, things are even more mysterious because we kind of believe that the non-performing loans are going to be under-reported as many of the debtors could have questionable credit quality.
Anyway, US banks are selling Chinese banks, probably for very different reasons other than being bearish on Chinese banks. Rather, they are themselves deleveraging. Last week I noted that Goldman Sachs was selling ICBC. Earlier, Bank of America has sold 5% stake in China Construction Bank (CCB). Now, Bank of America is going to sell another 4% as it is trying to raise capital (remember, banks can increase capital either by raising new money or cutting risk-weighted assets). Wall Street Journal reports that Bank of America will be selling about 10.4 billion shares to “a group of investors”, which will generate $1.8 billion of profit. After the sales, BofA will only keep 1% of stake.
It is not clear to whom BofA is selling the shares to, but buyers could end up be Chinese sovereign wealth funds or something. Just maybe.