BofA mulls more asset sales to boost capital

By Rick Rothacker

Mon Dec 26, 2011 8:39am EST

(Reuters) - Bank of America Corp (BAC.N) is lagging behind its major U.S. competitors in complying with new capital rules, leading the bank to consider even more asset sales, sources said.

The bank's management is focused on not being an outlier compared to its peers and believes it has "viable alternatives" to increase its capital levels, a person familiar with the situation told Reuters.

The bank, for example, could consider selling its Indian back-office processing operation, as other banks have, sources said. The bank has also said it is looking to shed real estate holdings and private-equity investments.

But after about $50 billion of asset sales since January 2010, which include sales such as most of its shares in China Construction Bank Corp (0939.HK) (601939.SS), the bank may not have many big-ticket items left.

With one analyst saying the bank may need $45 billion of additional capital by 2019, it may have to start cutting deeper into its franchise. That would mean shedding more significant businesses, such as parts of the investment bank or the Merrill Lynch brokerage. The bank can also improve its capital measures by retaining profits and running off risky loans, but those steps will take time.

The bank declined to comment on specific asset sales.

The question of how much capital the second-biggest U.S. bank will eventually need to raise is a key concern that is rattling investors. Bank of America, which had to be bailed out by the U.S. government during the financial crisis of 2008, has remained one of the weakest in the industry.

For the last two years, Chief Executive Officer Brian Moynihan has worked to gradually streamline the company and build capital, but investors have been disappointed with the speed of a turnaround.

While the bank, like other financial firms, has suffered from a sluggish economy and concerns about the European debt crisis, it has also incurred self-inflicted wounds, including a now-canceled plan to charge customers a $5-per-month debit card fee.

Bank of America's shares are down 58 percent this year and closed below $5 on Monday for the first time since March 2009.