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NEW YORK (AP) — Bank of America Corp. is selling half of its stake
in China Construction Bank Corp. to raise cash and shore up its
capital base.
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The nation’s largest bank by assets said Monday it will sell 13.1
billion shares in the Chinese bank for $8.3 billion to a group of
investors it declined to name. The sale, which had been expected,
will generate a gain of $3.3 billion for Bank of
America.
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The news came four days after the Charlotte, N.C. bank got a $5
billion investment from Warren Buffett’s Berkshire Hathaway Inc.,
which provided a big boost to Bank of America’s battered stock. The
billionaire investor made investments in other major companies such
as Goldman Sachs Group Inc., helping restore confidence in them
when they were out of favor.
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Bank of America rose 40 cents, or 5.2 percent, to $8.16 Monday
after news of the sale came out. The stock closed at $6.30 last
Tuesday, two days before Berkshire announced its
investment.
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After the sale, Bank of America will still own about 5 percent of
China Construction Bank. It currently owns about 10
percent.
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The sale is the bank’s latest move to increase its capital base to
comply with new international regulations created following the
global meltdown. The rules require big financial institutions to
hold more cash.
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Finance Chief Bruce Thompson says the bank raised about $5.8
billion in August. That comes on top of cash and cash-equivalent
securities of $402 billion at the end of second quarter.
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The bank has faced many problems stemming from its 2008 purchase of
the nation’s largest mortgage lender, Countrywide Financial Corp.,
as well as other issues. Bank of America has lost $15.3 billion in
the last four quarters. Its revenue fell 34 percent in the first
half of 2011 compared with last year after new regulations cut into
the fees it collects from checking account overdrafts and credit
cards.
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Half of all U.S. households have an account or do business with
Bank of America, making it more exposed than its rivals to weakness
in the economy.
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On Aug. 8, American International Group Inc. sued the bank for more
than $10 billion, claiming Bank of America deceived the insurer by
selling it faulty mortgage investments. Bank of America has already
paid a total of $12.7 billion this year to settle similar claims,
but that suit increased worries that more investors would sue and
further drain the bank’s cash reserves.
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