BofA Asset Sale in China, Better Than Buffett? (BAC, BRK-A, BRK-B, JPM, WFC, XLF, FAS)

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Now that Bank of America Corp. (NYSE: BAC) has raised $5 billion in cash from Warren Buffett, it’s time to look around and see what assets the bank might have on the block next. The crazy rumor that JP Morgan Chase & Co. (NYSE: JPM) might be interested in taking over BofA was never more than that, but it got everyone excited for a while.  To put a neat wrapper on Buffett’s investment in BofA, Berkshire Hathaway Inc. (NYSE: BRK-A, BRK-B) owns 386.6 million shares in Wells Fargo & Co. (NYSE: WFC), which has gained more than 3% since Buffett’s announcement and netted the sage of Omaha a tidy $120 million gain yesterday.

Now Reuters reports that an announcement may be coming as early as Monday on the sale of half of BofA’s stake in China Construction Bank to an unnamed buyer.  BofA owns a 10% stake in the bank and the value of that stake is estimated to be $17 billion. We noted two weeks ago that potential buyers could include the sovereign wealth funds of Qatar and Kuwait.

BofA is not commenting, of course, but raising another $8.5 billion could boost the bank’s shares again as it bolsters its capital. A report on CNBC, cited at Nasdaq.com, claimed that half of BofA’s stake would be sold to “a group of sovereign-wealth funds and institutions from the U.S., China, Malaysia and the Middle East.”  Final composition of the investor group is not yet known.

If BofA does sell, it will have made a nice profit on an investment of $3 billion for its full 10% stake at the time of the Chinese bank’s IPO in 2005. As a core investor, BofA agreed not to sell most of its 25.6 million shares until August 29th of this year.

BofA’s shares have risen nearly 2.5% again today, to $7.84, in a 52-week range of $6.01-$15.31. The stock has also traded more than 300 million shares as of about 2 pm this afternoon.

The SPDR Financial Select Sector Fund (NYSE: XLF) is up more than 1.3%, at $12.83, in a 52-week range of $11.81-$17.20. The Direxion Daily Financial Bull 3X Shares fund (NYSE: FAS) is up more than 4%, at $13.90, in a 52-week range of $8.72-$34.29.

Paul Ausick