August 10, 2010 (Chinavestor) Bank of America (NYSE:BAC), the Dow component and largest U.S. lender by assets, could receive a capital infusion of about $13 billion by recognizing gains tied to its stake in China Construction Bank (HK:939), the second-largest bank in China and the world behind Industrial and Commercial Bank of China (SHA:601398).
North Carolina-based Bank of America (NYSE:BAC) agreed to buy shares of China Construction Bank (HK:939) in 2005 and has held as much of 17% of the Chinese bank's stock. Bank of America (NYSE:BAC) now owns 11% of China Construction Bank (HK:939) after paring its stake in 2009.
Bank of America (NYSE:BAC) has been forced to recognize the value of its China Construction stake (HK:939) at $9.2 billion, the original cost of the investment. With the lockup expiring in less than a year, accounting rules require the stake to be carried at market value -- now $22.9 billion, according to Bloomberg News.
The increased value of the China Construction (HK:939) stake will be recognized in Bank of America's (NYSE:BAC) third-quarter financials. Bank of America (NYSE:BAC) posted a $7.3 billion pretax gain on 2009’s income statement by selling some China Construction (HK:939) shares, Bloomberg reported.