* Bank of America stock up 1.6 pct
* BofA ends ties with CCB that began in 2005
* Other U.S. banks also retreating from China investments
By Elzio Barreto, Denny Thomas and Peter Rudegeair
HONG KONG/NEW YORK, Sept 3 (Reuters) - Bank of America Corp started selling its remaining stake in ChinaConstruction Bank Corp (CCB) on Tuesday for up to$1.5 billion, according to a term sheet of the deal seen byReuters, marking the final step of the U.S. bank's multi-yearexit from the asset.
The Charlotte, North Carolina-based bank joins a list ofWestern banks that have found that their investments in Chinesefinancial firms did not provide the strategic benefits they hadhoped for. Earlier this year, Goldman Sachs Group Inc sold out of its seven-year investment from Industrial andCommercial Bank of China.
The sales come as the Chinese banking system has shown signsof stress, with bad loans picking up as economic growth slows.As a result, several Chinese lenders are preparing to launchequity sales to bolster their capital base.
But even before the Chinese banking sector weakened, manyU.S. and European banks decided to sell the assets to bolstertheir capital bases and focus on their main businesses.
Bank of America's investment in CCB dates to 2005 when itpaid $3 billion for a 9.9 percent stake ahead of the Chinesebank's initial public offering.
At the time, Bank of America's then Chief Executive KennethLewis said the partnership was designed to give Bank of Americamore access to roughly 1.3 billion Chinese consumers, while CCBwould benefit from BofA's U.S. retail banking experience.
The U.S. bank increased its holdings in following years,before paring it down starting in 2009. In 2011, the bank raiseda combined $14.9 billion from selling shares in CCB to a groupof investors that included Singapore's Temasek Holdings.
Bank of America launched Tuesday's sale after a lock-up onits remaining stake expired last month.
The bank launched an offer for 2 billion Hong Kong-tradedshares of CCB in a range of HK$5.63 to HK$5.81 ($0.73to $0.75) each, according to a term sheet of the deal seen byReuters. The price is equivalent to a discount of up to 5.1percent to Tuesday's close of HK$5.93.
Bank of America shares rose 1.63 percent to $14.35 inmorning trading.
CCB shares are down 4.7 percent since the beginning of theyear in Hong Kong, outperforming the 9 percent decline in thefinancial sub-index of the Hong Kong stock exchange in2013.
CLEANING UP
Bank of America has been cleaning up its balance sheet sincethe financial crisis. In the bank's 2012 annual report, chiefexecutive Brian Moynihan wrote that the bank had divested morethan $60 billion of assets outside its main businesses whileimproving capital ratios and maintaining its earnings power.
The Charlotte, North Carolina-based bank increased itssecond-quarter profit 70 percent to $3.57 billion. The bank managed to trim operating expenses by 6percent while boosting its Basel III capital ratio.
The bank has been particularly active in streamlining itsinternational operations. In recent years Bank of America soldits foreign wealth management businesses to Julius Baer Group and credit card portfolios in Canada, Spain andBritain to various banks and private-equity firms.
Some foreign banks continue to hold on to their investmentsin Chinese lenders. Among them are HSBC Holdings Plc,which owns a 19.9 percent holding in China's Bank ofCommunications Co Ltd and Spain's BBVA's has a 15percent stake in China Citic Bank Corp Ltd.
HSBC Holdings (HSBA)