Bank of America is reportedly having difficulty selling its ~$17 billion stake in CCB, China Construction Bank.This is the yet another woe facing the bank as it struggles to convince traders and shareholders that it does not need to raise capital.
Goldman Sachs, which just downgraded its outlook of BofA, cites these 4 issues plaguing market opinion of BofA right now:
- objections to a proposed $8.5 billion settlement over mortgage backed securities (MBS)
- sovereign debt issues
- increased MBS lawsuits
- macro concerns
To address them, Brian Moynihan has now gone public twice. On CNBC and on a conference call with Bruce Berkowitz on Wednesday, he insisted that he believes this is all a misunderstanding about Bank of America’s liquidity situation. But people are saying his conference was call short on details. And in our reader poll, opinion about his appearance on CNBC was split.
So none of that has worked and now the FT is reporting this:
- BofA’s stake in CCB used to be worth $20 billion, now it’s worth $17 billion
- KIA, which might have been considering buying BofA’s CCB stake, is stepping away because its stakes in ICBC and Ag Bank of China are “enough exposure to Chinese banks”
- “If CCB does launch a rights offer – as is widely expected – and BofA is still a main shareholder, it will be obliged to participate, using capital it can ill afford to part with”
- A bunch of other Chinese banks are expected to IPO soon, which would flood the market with Chinese bank shares and possibly dilute the price of the CCB stake
- And HSBC might sell its 8% stake in Bank of Shanghai
BofA told the FT: discussions on the CCB stake are always ongoing. But the lower the share price goes, the more shareholders worry. Currently selling at $7.25, it dipped to $6.40 on August 8th.