US lender exercises option to buy 6b shares
Bank of America Corp will exercise call options next week to buy 6 billion H shares of China Construction Bank Corp for about HK$14.52 billion, increasing its holding to 10.75 per cent from 8.2 per cent, according to both banks yesterday.
Analysts said the United States lender might want to exercise the options because it could sell existing shares later to raise capital and yet still retain a significant stake in the mainland's second-largest bank.
'Bank of America is one of the US lenders which were hard hit by the subprime mortgage crisis,' said Louis Tse Ming-kwong, a director of VC Brokerage. 'Selling part of its CCB holdings will help it raise capital to bolster its balance sheet and help cover the write-down it made for the subprime crisis.'
By exercising the call options and then selling down its existing holdings in CCB, 'Bank of America can raise the capital while at the same time keep a close relationship with CCB', Mr Tse said.
'This is a good move for Bank of America. But then, if it is really going to sell down its holdings in CCB, it is going to add pressure on the share price of mainland lenders.'