BofA and PNC Sell BlackRock Stake - Analyst Blog

Bank of America Corporation (BAC) and PNC Financial Services Group Inc. (PNC) sold $8.3 billion of stock in the world's largest money manager, BlackRock Inc. (BLK), on November 9. The largest stakeholders of BlackRock disposed of their share as this was not vital to their main business.

Of the combined 51.1 million shares sold, the biggest public offering in the U.S. this year, BofA contributed 43.6 million and PNC the remaining. The shares were priced at $163 each.

BofA, which held 34% of BlackRock, had obtained its stake as part of its acquisition of Merrill Lynch & Co. in 2009. PNC's 24% stake dated back before 1999, when the New York-based investment firm went public.

A substantial portion of the BlackRock sale has been taken up by Japan's third-biggest bank, Mizuho Financial Group Inc. On November 11, 2010, Mizuho agreed to buy 2.45 million shares (2% stake) in BlackRock for $500 million, Bloomberg reported.

Mizuho's acquisition is in an effort to step up its investments in Europe, North America and Asia. Mizuho and BlackRock will collaborate on their asset management, mutual funds and pension funds.

In another instance of BofA's shedding of non-core assets to accumulate funds and fortify its balance sheet, the bank is slated to sell its entire entitlement in China Construction Bank's (“CCB”) upcoming 61.6 billion yuan ($9.3 billion) rights issue. On November 11, 2010, Temasek Holdings, Singapore's state investment firm, said that it will purchase the stake.

BofA's recent actions to focus on core businesses will definitely help the bank improve its capital adequacy ratios (CAR) to comply with the upcoming tougher banking regulations (Basel III).

The BofA stock maintains a Zacks #3 Rank, which translates into a short-term "Hold" recommendation. Also, considering the company's business model and fundamentals, we have a long-term “Neutral” recommendation on the stock.

We also cover PNC with a Zacks #3 Rank and a long-term "Neutral" recommendation.

 
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