Bank of America shares leapt another 5% today on news that they are selling their stake in the China Construction Bank for $8.3 billion. The bank will book a substantial profit on the deal, riding on the coat tails of the world’s fastest growing economy. Given the concerns about the health of the real estate market in the Middle Kingdom, this may not be such a bad trade.
The news comes on the heels of other asset divestitures, including their Canadian credit card unit for $8.6 billion, their Balboa insurance unit for $700 billion, and their sale of First Republic and Columbia Management in 2009.
BAC continues to circle the wagons, chipping away at both sides of the income statement. Bank layoffs could reach 10,000 by year end, and further asset sales are in the cards. It all amounts to serious deleveraging ahead of the next financial crisis, which could come as early as next year.
Followers of my Macro Millionaire trade mentoring program received an urgent trade alert from me on Wednesday, August 24 to buy (NYSE:BAC) stock at $6.85. The next day, Warren Buffet made his move to buy a 5% stake and the stock traded as high as $8.91, nearly hitting my yearend target of $9. If the rally continues, I may be tempted to take a profit when the stock hits the 50 day moving average at $9.24 and roll into another, cheaper bank.