Bank Of America Steps Closer To Target

Bank of America (BAC) raised an additional $5.9 billion through the conversion of privately-held preferred shares into common stock on Wednesday and said it was “well on its way” to meet the regulatory mandate of plugging nearly $34 billion in capital shortfalls.

With this recent step, the Charlotte, North Carolina-based firm has attained 76% of the daunting task assigned to it by the federal government following a stress test to check its ability to hold up against future loan losses. A portion of the $26 billion that Bank of America has raised came from its sale of 1.25 billion common shares and a partial stake in China Construction Bank before the stock swaps.

The beleaguered banking giant said that none of the preferred shares exchanged for common stock were held by the government as part of the Troubled Asset Relief Program. While Bank of America seems keen to ensure less federal interference in the future, rival Citigroup’s (C) plans to convert a part of the government’s stake into common stock would make the US government a large shareholder in the New York firm.

Bank of America may also swap another set of non-government preferred shares for common stock depending on market conditions. The largest U.S. bank is also mulling several joint ventures and the sale of non-core assets like First Republic Bank and Columbia Management Group to improve its capital base.

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