Bank of America, the nation’s largest bank by assets, is planning on substantially trimming its investment in BlackRock, the biggest publicly traded money manager on the planet.
In an announcement, BlackRock said that BofA is selling 34.5 million shares, and PNC Financial is selling 7.5 million shares. The New York Times points out that the move aligns with CEO Brian Moynihan’s desire to cut back on investments in noncore businesses. Should the sale go as planned, it will leave BofA with a 12.6 percent position in the company through preferred shares but will eliminate the bank’s position in BlackRock common stock.
So why the sale now, when BlackRock is down 28 percent year-to-date? Among other things, it could have to do with that nasty letter a bunch of bond investors sent to BofA a few weeks ago. BlackRock was among the firms asking BofA to repurchase mortgages that may contain faulty underlying paperwork. Talk about a strain on investor relations! As The Wall Street Journal puts it:
BofA has pretty sternly said it will do no such thing. A recent Heard on the Street described BofA’s stance in the foreclosure crisis as Churchillian and said it was ready for a “long war” with companies like BlackRock that want the bank to repurchase mortgages. Earlier this week, one influential bank analyst opined that BofA might even put the Countrywide unit into bankruptcy rather than buy back troubled mortgages.
Is Bank of America taking its capital and storming off in a huff? Maybe, but BlackRock CEO Larry Fink probably doesn’t mind; if BofA and PNC are selling out, the bigshot CEO has two fewer major investors to answer to, says Shira Ovide.
[W]ith one headache out of the way, BlackRock can now aim the migraine medicine at its real problems: staunching the outflow of assets from its funds.
mtaylor [at] observer.com | @mbrookstaylor