BofA Eyes Expansion in China – Analyst Blog

According to a Wall Street Journal report, Bank of America Corporation (BAC) is looking to expand its operations in China. Currently, the bank has some investment banking and lending operations in the country. BofA also owns a minority stake in China Construction Bank.

 

According to the source, BofA is now considering operating locally in China, which implies that it would have to invest a significant amount of new capital. Expectedly, BofA will bulk up its commercial business in China, instead of its retail banking business.

 

Recently, the Treasury received net proceeds of $1.5 billion from the sale of warrants, entitling it to purchase BofA common stock. BofA is the first among four banks whose warrants were scheduled to be sold via auctions this month. The three other banks are Washington Federal (WFSL), Texas Capital Bancshares (TCBI) and Signature Bank (SBNY).

 

The amount received from the auction of BofA warrants exceeds $1.1 billion raised from the sale of Goldman Sachs (GS) warrants earlier.

 

The market turmoil was more harmful to BofA than its peers. However, the company has concluded its biggest acquisitions. BofA acquired Merrill Lynch almost during the height of the financial crisis last year. It also acquired Countrywide Financial Corporation in July 2008.

 

The CEO views these deals as beneficial for stakeholders of the company. Furthermore, this will allow the bank to focus on rebuilding customer relationships. Also, if the expansion in China comes into effect, the bank can expect to significantly benefit from the emerging Chinese market.

 

Finally, differences of opinion with regulators and lawmakers over Merrill’s 2008 bonus payment issues amid escalating losses has ended with the recent $150 million settlement between the Securities and Exchange Commission (SEC) and BofA to conclude the civil allegation on BofA for misleading its shareholders in its purchase of Merrill Lynch & Co. last year.