Bank of America sells stake in Chinese bank

Eve Troeh Aug 30, 2011
HTML EMBED:
COPY

Bank of America sells stake in Chinese bank

Eve Troeh Aug 30, 2011
HTML EMBED:
COPY

Jeremy Hobson: Bank of America has just taken a drastic step in search of cash. It is selling much of its stake in the China Construction Bank, which gave BofA a way into the fast-growing Chinese real estate market.

Marketplace’s Eve Troeh reports.


Eve Troeh: Bank of America needs cash — fast. $50 billion to convince investors and international regulators that it’s strong. So, it’s been selling assets — like its credit card business in Canada and Europe. And now billions of shares in China Construction Bank. That gets Bank of America more than $3 billion closer to its goal.

Arthur Kroeber at Dragonomics research in Beijing says even though it was a fire sale, they got a good deal.

Arthur Kroeber: It’s very unlikely that China Construction Bank’s stock price is going to be much higher two, or three, or five years from now.

That’s because Chinese banks have been lending a lot in recent years. Eventually they’ll need to show more capital, the way Bank of America has to do right now. That could limit growth.

BofA still holds 5 percent of China Construction Bank, and plans to continue what both are calling a strategic partnership. But Kroeber says the Chinese bank hasn’t treated BofA like much of a partner since it bought in — it seemed to mostly just want the money. And there are now plenty of other investors willing to provide that.

I’m Eve Troeh for Marketplace.

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.