Wednesday, November 3, 2010

BAC To Punt BLK Stake

Bank of America Corp., the biggest U.S. bank by assets, may record a pretax gain of more than $600 million by selling a portion of its stake in BlackRock Inc. 

Bank of America plans to sell 34.5 million shares in BlackRock, the world’s largest money manager, plus another 6.3 million depending on demand, BlackRock said today in a statement. The Charlotte, North Carolina-based bank’s 34 percent stake in BlackRock had a carrying value of $10.1 billion, or about $156 a share, according to a June 30 regulatory filing. The gain would be about $695.2 million if all of the shares were sold at yesterday’s closing price of $173.04. 

“The transaction is consistent with our strategy to narrow the focus of our franchise and ensure that every activity we have at Bank of America is core to our three customer groups, consumers, companies and institutional investors,” Jerry Dubrowski, a Bank of America spokesman, said.

I personally think this is shortsighted. BLK serves as a revenue/earnings diversifier that has a consistent record of success.  BAC does not need the capital right now, so why punt?

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About Me

A student of the markets that has held portfolio management, analysis and trading positions for over 15 years.