BofA Capital Raising Has Yielded $26B

Bank of America (BAC) on Wednesday said it has raised nearly $26 billion of capital, putting it more than three quarters of the way toward the target mandated by the government after its recent stress tests.

The Charlotte, N.C.-based bank said it raised $5.9 billion by exchanging perpetual preferred shares held by private hands into common stock, it said. It may issue another 564 million common shares in this manner.

Much of Bank of America's other disclosures were already known, including the most significant contribution of $13.5 billion from the issuance of 1.25 billion new shares of common stock.

BofA also confirmed that it booked a gain by selling some stock holdings in China Construction Bank, though it did not disclose the sum of the gain. The number has been widely reported at $7.3 billion.

The firm will also benefit from these transactions by reducing its deferred tax asset deduction by $1.8 billion, which will enhance the Tier 1 common capital ratios BofA is required to boost.

Bank of America must still fill a gap of $7.9 billion to meet the government's $33.9 billion target. Besides the possible exchange of additional preferred shares, BofA is still pursuing plans to sell First Republic Bank and Columbia Management Group and to establish unspecified joint ventures. The strategy would both raise capital and reduce the need for capital reserves for potential future losses.

"We are quite pleased with the capital-raising effort and the progress toward completing the asset sales and establishment of the joint ventures," CFO Joe Price said in a statement. "The company hopes to use the majority of the proceeds from these initiatives to reduce reliance on government support for the company."