Bank of America Corp. (BAC) led decliners in the Standard & Poor’s 500 Index after China Construction Bank Corp. said the U.S. lender will keep at least half its stake, spurring new debate on the American firm’s capital plans.
Bank of America slipped 55 cents, or 7.9 percent, to $6.42 at 4:15 p.m. in New York Stock Exchange composite trading, the lowest since March 2009. The lender, the biggest in the U.S., agreed to retain at least half its 10 percent holding, China Construction President Zhang Jianguo told reporters in Hong Kong. Some analysts, including Charles Peabody of Portales Partners LLC, had estimated the Charlotte, North Carolina-based bank would divest all of its shares.
“People like me thought they were going to unload the whole thing to help build their capital,” Peabody said in an interview. “It means the process of getting to their Basel 3 capital goals could be more elongated, or that they will be more dependent upon increasing their disposition of non-core assets.” The latter could further pinch revenue, he said.
Bank of America Chief Executive Officer Brian T. Moynihan, 51, has been selling businesses and assets as the firm seeks to comply with new international capital standards set by the Basel Committee on Banking Supervision. Last week the company announced it was exiting credit-card markets outside the U.S., and Moynihan said the lender will continue to pursue such sales.
Moynihan’s company has lost 52 percent of its market value this year, the worst showing in the Dow Jones Industrial Average, as costs tied to the 2008 acquisition of subprime lender Countrywide Financial Corp. weighed on capital and sparked speculation that the firm would have to issue new stock. He has repeatedly said a share sale isn’t needed and that he can divest non-core assets to meet capital standards.
Bank of America owned 25.6 billion shares valued at $19.6 billion as of June 30, the lender said in an August filing.
China Construction, the world’s second-largest lender by market value, said it’s discussing a strategic cooperation agreement with Bank of America after extending an existing accord to the end of 2012.
The lenders may work together on retail and corporate operations, as well as wealth management and investment banking, the bank told reporters in Hong Kong today. A separate agreement that bars Bank of America from selling most of its stake is set to expire Aug. 29.
“Bank of America will be a long-term strategic partner and a major shareholder,” Chairman Guo Shuqing told reporters in Beijing today. The U.S. lender has improved its capital adequacy ratio and will overcome other difficulties, he said.
Jerry Dubrowski, a Bank of America spokesman, said the bank doesn’t comment on the stock price. As for China Construction, the two banks have a long-term strategic partnership, Dubrowski said via e-mail. “We look forward to expanding and extending that relationship, which has been very positive for both companies,” he said.
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