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BofA expects $1.8B gain from stake in Chinese bank

November 14, 2011

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CHARLOTTE, N.C.—Bank of America will sell most of its remaining shares in China Construction Bank as it raises cash and shores up its capital base.

The latest sell-off in the Chinese bank, announced Monday, is expected to generate an after-tax gain of about $1.8 billion. Last month Bank of America posted a $3.6 billion third-quarter gain by selling shares of China Construction.

Bank of America had owned about 10 percent of the bank's shares before it announced plans in late August to cut its stake. After the latest sale of about 10.4 billion shares closes this month, Bank of America will own about 1 percent of China Construction Bank Corp.'s common shares. The shares are being sold to a group of private investors in transactions managed by Bank of America Merrill Lynch.

Bank of America, like others in the financial sector, is making changes to comply with new international regulations. The bank has recently been selling off non-core assets and businesses. That includes its recent sale of a stake in HCA Holdings Inc. for an after-tax loss of $1.2 billion. Like many peers, Bank of America has also recently been cutting jobs.

Chief Financial Officer Bruce Thompson said the latest sale, supplemented by a related realization of deferred tax assets, will generate an additional $2.9 billion to bolster Bank of America's capital base.

With the sale, a strategic assistance agreement between Bank of America and China Construction Bank will remain in place. That pact covers cooperation in specific business areas.

Shares of Bank of America rose 3 cents to $6.24 in premarket trading. The shares have lost about half their value this year. Bank of America posted lower revenue and income in its credit card, real estate and investment banking businesses and ceded its spot as the largest bank in the U.S. to JPMorgan Chase & Co.

Bank of America Corp., based in Charlotte, N.C., has faced numerous problems stemming from its 2008 purchase of the nation's largest mortgage lender, Countrywide Financial Corp., but the bank says that becoming smaller is part of its strategy.