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Temasek Syndicate Buys BofA Shares in CCB

A syndicate including Temasek, the Singapore state investment agency, and a number of Chinese institutions has bought 10.4 billion shares in China Construction Bank from Bank of America for about $6.6 billion, according to people familiar with the transaction.

Two Chinese girls make their to the China Construction Bank head office in Beijing 28 October 2005. China Construction Bank (CCB) met a muted response from investors in its debut on the Hong Kong Stock Exchange after making the world's biggest share offer in four years.
STR | AFP | Getty Images
Two Chinese girls make their to the China Construction Bank head office in Beijing 28 October 2005. China Construction Bank (CCB) met a muted response from investors in its debut on the Hong Kong Stock Exchange after making the world's biggest share offer in four years.

The sale, which represents a holding in CCB of about 4 per cent, is BofA’s second significant disposal of shares in three months, following the transfer of a 5 per cent stake to a China/Singapore syndicate in August. The latest deal leaves the US bank with 1 per cent of the Chinese lender.

The second-largest U.S. bank by assets said it would receive about $6.6bn for the shares, netting about $2.9 billion in profit or $1.8 billion after tax. CCB said in a statement that BofA’s sale reflected “its own needs” and would not affect CCB’s business or development.

It was not clear how many Chinese institutions were involved in the syndicate, or how many CCB shares had been acquired by each of the institutions and by Temasek. The Singapore agency is expected to hold some of the shares through its Seatown alternative investment subsidiary and its Fullerton fund management arm.

Temasek, which held about 7 per cent of CCB before the latest transaction, was joined in the August syndicate by China’s State Administration of Foreign Exchange, which manages most of China’s foreign reserves, the National Social Security Fund, and Citic Securities.

BofA sold 13.1 billion CCB shares in August for about $8.3bn. At the time, BofA said it would result in a $3.3 billion after-tax profit. The sale was finalised last quarter.

Sales of BofA’s remaining stake are restricted until August 2013, the bank said in a quarterly filing with the US Securities and Exchange Commission on Monday. Its remaining holdings in the Chinese lender are BofA’s only equity investment in another financial institution, the U.S. bank said.

The move to pare its stake in CCB is in line with BofA chief executive Brian Moynihan’s strategy to reduce the balance sheet and dump non-core assets. It has already jettisoned a Canadian credit card division, sold an insurance unit and announced plans to retreat from some European operations.

“Our decision to sell the bulk of our remaining shares in China Construction Bank is consistent with our stated objective of continuing to build a strong balance sheet,” Bruce Thompson, BofA chief financial officer, said in a statement.

The bank reduced its assets, adjusted for risk, by $117 billion over the year ending September 30. The U.S. lender, which has seen its share price plunge about 54 per cent this year, is under pressure to raise capital. BofA shares trade at less than one-third of book value.

BofA’s share price was down about 2.6 per cent to $6.05 by the close in New York on Monday. In Hong Kong, CCB closed 1.08 per cent higher on Tuesday at HK$5.59.

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