UPDATE 1-China's CCB says 10 pct BofA stake 'reasonable'

* Speculation swirls BofA to cut 16.6 pct holding

* CCB says no rise in bad loan ratio in '09 to date

* CCB shares fall 10 percent after weak Q4 earnings

(Adds details, quotes, background)

HONG KONG, March 30 (Reuters) - China Construction Bank (CCB) (0939.HK), the world's second-largest lender by market value, said on Monday it would be "reasonable" for major shareholder Bank of America (BAC.N) to reduce its stake to 10 percent.

Amid speculation the struggling U.S. bank will further sell down its remaining 16.6 percent stake to generate cash, the Chinese bank's CFO, Pang Xiusheng, said CCB had seen no increase in its non-performing loans ratio so far this year. CCB, which saw its share price fall 9.6 percent on Monday after it reported weak earnings, also said that its new loan target for the year is 500 billion yuan, having already lent out 350 billion in the first two months.

CCB President Zhang Jianguo told a news conference he considered it would in the future be "a reasonable arrangement for BofA to maintain about a 10 percent stake."

Other Western banks have sold down their investments in Chinese banks as a brutal economic slowdown has driven them to seek new ways of boosting depleted cash reserves to strengthen balance sheets.

BofA cut its CCB stake by 2.5 percent earlier this year.

CCB disappointed investors with a worse-than-expected 30 percent drop in fourth-quarter earnings as it booked higher-than-expected impairment charges for bad loans.

While CCB signalled one big shareholder might reduce its stake, it said another was willing to buy.

Chairman Guo Shuqing said Singapore state investor Temasek Holdings [TEM.UL] wanted to increase its 6.1 percent stake. CCB did not clarify when or by how much, saying only the Singapore firm would do so over the long term.

The bank also said it would consider acquisitions of commercial banks abroad.

HSBC on Monday cut its rating on CCB (601939.SS) to underweight from neutral and its 2009 earnings forecast by 8 percent on expected higher impairment costs. (Reporting by Clare Jim, Xin Zhou, Parvathy Ullatil and Tony Munroe, Editing by John Stonestreet)