Bank of America Corp., facing an estimated $18 billion bill to resolve mortgage and foreclosure disputes, may cover the cost by liquidating its stake in China Construction Bank Corp., according to a research note from Citigroup Inc.
Instead of selling stock to raise capital, Bank of America could liquidate its 10% stake in CCB starting in August, Keith Horowitz of Citigroup said Wednesday. Bank of America owned 25.6 billion shares of CCB valued at $21 billion as of March 31, according to a May filing.
Bank of America may also sell its stake in CCB to improve its capital levels ahead of tougher international rules, Horowitz said. The sale could result in a $10 billion after-tax gain, he said.
The lender "remains a significant shareholder in China Construction Bank, and we intend to continue the important long-term strategic alliance with CCB originally entered into in 2005," said Jerry Dubrowski, a Bank of America spokesman. While restrictions on the sale of most CCB shares end in August, about 2 billion units cannot be sold until 2013, he said.
Last month, Bank of America agreed to sell its remaining stake in BlackRock Inc. back to the world's biggest money manager for about $2.5 billion. The bank said at the time that the sale wouldn't affect its business relationship with BlackRock.