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Enter Bank of America: exit Citigroup

Toasting a happy future? The CEOs of BoA
and CCB celebrate their new relationship

Bank of America announced in June its intention of investing $3 billion for a 9% stake in China Construction Bank, China's second-biggest state lender, as part of a strategic move into the country. In a deal that took the market by surprise, Bank of America stated that it had entered into agreements with CCB to provide strategic assistance in relation to, inter alia, corporate governance, risk management, credit cards, consumer banking and treasury services. Bank of America is presumably salivating over the prospect of CCB's 136 million retail accounts and 14,500 branches.

Under the agreement, BoA will purchase $2.5 billion-worth of existing shares from a Chinese government entity and an additional $500 million at the time of CCB's listing, widely expected sometime in the autumn. The US lender has the option to increase its stake in CCB to 19.9% at any time over the next five-and-a-half years. The terms of the purchase value CCB at about $33 billion.

As Bank of America celebrated its apparent coup, Citigroup was left to lick its wounds after reportedly being ejected from the underwriting syndicate for CCB's forthcoming IPO.

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