Bank Of America Plunges On China Construction Worries

Bank of America BAC shares are getting crushed yet again on Monday, after China Construction Bank Corp. said that BAC will retain at least half of its stake in the company. Some investors had been hoping that BAC would divest its entire 10% stake in China Construction in order to raise capital. The stock has lost 6.38% to $6.53, making it the worst performer in the S&P 500 on the session. The dive comes on the heels of comments from China Construction President Zhang Jianguo indicating that Bank of America will keep at least half of its holdings in the Chinese bank. Some Wall Street analysts previously believed that BAC was getting to unload the entire position as it maneuvers to meet its Basel 3 capital goals. Charles Peabody of Portales Partners LLC, told Bloomberg, “People like me thought they were going to unload the whole thing to help build their capital,” Peabody said in an interview. “It means the process of getting to their Basel 3 capital goals could be more elongated, or that they will be more dependent upon increasing their disposition of non-core assets.” One way or another, BAC is going to have to comply with international capital standards set by the Basel Committee on Banking Supervision. The company's current strategy to raise capital is to sell non-core assets, and management has repeatedly assured investors that it does not need to do an equity offering. The market clearly is not convinced, as BAC has lost more around half its value this year alone. Today's news relating to China Construction is causing the stock to continue its slide, and just adds more confusion to the capital situation at the bank. Nevertheless, it appears that the two companies are set to continue their partnership. “Bank of America will be a long-term strategic partner and a major shareholder,” Chairman Guo Shuqing told reporters in Beijing today. Bank of America spokesman Jerry Dubrowski told Bloomberg via email that “We look forward to expanding and extending that relationship, which has been very positive for both companies.”