Construction Bank shares jumped, heading for their biggest two-day gain in more than two years, after the US firm said it would keep a 5% stake in the world's second-biggest lender by market value. The partnership has been "mutually beneficial," Bank of America Chief Executive Officer Brian T Moynihan said in the statement. "The sale has removed concern that BoA's shares would be dumped into the market," said Danny Yan, a Hong Kongbased portfolio manager at Haitong International Asset Management, which oversees $600 million. "A few investors were able to buy the shares, so it reduced market uncertainty about an oversupply."
Moynihan has been selling businesses and assets as the firm seeks to comply with international capital standards set by the Basel Committee on Banking Supervision . The bank, the largest in the US by assets, has slid 37% this year in New York trading amid investor concern that it may need to issue stock as mortgage-related losses deplete capital. Selling the shares helps Bank of America raise capital to comply with tougher minimums that may be imposed by regulators as they try to prevent a repeat of the 2008 financial crisis. The CCB deal will generate about $3.5 billion in additional Tier 1 common capital and reduce risk-weighted assets by $7.3 billion under Basel I, Chief Financial Officer Bruce Thompson said in the statement.
The stake is being sold at a discount of about 11%, based on CCB's closing price on Mondayin Hong Kong. It has returned 77% since the shares were acquired in 2008, according to Jerry Dubrowski, a Bank of America spokesman. Bank of America paid $3 billion for a 9.9 percent CCB stake. The U.S. lender later exercised an option to buy an additional 11 percent, paying $9.2 billion. Bank of America sold its initial stake in CCB in May 2009, reaping a pretax gain of $7.3 billion , as loan losses mounted amid the recession . Last year, the bank sold rights to buy 1.79 billion CCB shares to Temasek.
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