China consortium biggest buyer of 13bn CCB shares of BofA

China asked American bank to sell only half its holdings in CCB.

A Chinese consortium was the biggest buyer of the China Construction Bank stake that Bank of America sold last month, according to several people familiar with the deal.

The State Administration of Foreign Exchange, which manages most of China’s $3,200bn in foreign reserves, the National Social Security Fund, and Citic Securities bought the CCB shares.

Bank of America sold 13.1bn shares in the Chinese lender – half of its 10 per cent holding – generating $8.3bn in cash for the troubled US bank, and increasing its tier one capital buffer by $3.5bn.

The Chinese government’s involvement comes as domestic bank shares are under pressure due to big capital raising exercises. Beijing asked Bank of America to sell only half its holdings in CCB, China’s second-largest bank by market capitalisation, the people added.

A person close to BofA said selling more of the CCB stake “would have been largely incremental” in reinforcing the bank’s capital position “so it made sense to structure the sale the way we did”. He added that not all of the shares could be sold until next year “so selling the entire position was not an option”.

Chinese bank shares have fallen 11 per cent in the past month despite reporting impressive earnings because of fears of dilution from expected rights issues. According to Citigroup, Chinese banks have not had such low valuations since the global financial crisis hit.

View the full story in the Financial Times.