Bank of America CEO Moynihan Says Expect 3,500 Job Reductions This Quarter
Bank of America Said to Plan 3,500 Job Cuts This Quarter
Robert Caplin/Bloomberg
Bank of America Corp. signage is displayed at a branch in New York, U.S.
Bank of America Corp. signage is displayed at a branch in New York, U.S. Photographer: Robert Caplin/Bloomberg
Aug. 19 (Bloomberg) -- Bank of America Corp. Chief Executive Officer Brian T. Moynihan told his managers at the biggest U.S. lender in a memo yesterday to expect 3,500 job cuts this quarter. Francine Lacqua reports on Bloomberg Television's "On the Move." (Source: Bloomberg)
Aug. 11 (Bloomberg) -- Brian Charles, an analyst at RW Pressprich & Co., talks about Bank of America Corp.'s stock performance and the impact mortgage-related losses may have on the company. Charles, speaking with Erik Schatzker on Bloomberg Television's "InsideTrack," also discusses Bank of America's Chief Executive Officer Brian Moynihan. (Source: Bloomberg)
Bank of America Corp. (BAC), the biggest U.S. lender, will eliminate about 3,500 jobs this quarter to focus “on what we can control” amid market turmoil, said Chief Executive Officer Brian T. Moynihan.
Some workers already were informed of the dismissals, which are in addition to 2,500 reductions made this year, Moynihan said yesterday in a memo to senior managers. Cuts will affect operations across the Charlotte, North Carolina-based firm and include as much as 5 percent of the investment-banking unit, or about 600 employees, said two people with knowledge of the plans.
Moynihan is under pressure to reduce expenses at the bank, whose market value has plunged by about half this year. He’s booked about $30 billion in costs tied to home loans since replacing Kenneth D. Lewis in 2010, mostly because of the 2008 takeover of subprime lender Countrywide Financial Corp. At the same time, revenue is shrinking as the U.S. economy slows.
“Clearly, Bank of America has more wood to chop” in terms of job reductions, said Jonathan Hatcher, a Jefferies Group Inc. credit strategist specializing in lenders, who added the revenue pinch will force companies to become more productive with fewer people. “Unfortunately, we’re going to see further cuts at other banks.”
Project New BAC
The 6,000 job cuts disclosed so far this year, representing 2 percent of the firm’s approximate 287,000 workers at the end of 2010, precede Moynihan’s expense-trimming effort called Project New BAC, he said in the memo. That initiative may result in deeper job cuts than the one announced yesterday, said one of the people. The lender may eliminate at least 10,000 jobs, the Wall Street Journal reported, citing an unidentified person.
Scott Silvestri, a Bank of America spokesman, declined to comment on that figure. Managers will meet for a final review of the first stage of Project New BAC in early September, Moynihan said in the memo. The company is first examining cost-cutting opportunities in the consumer-banking operations, including deposits, mortgages and credit-cards, as well as support staff including human resources, before tackling costs in the firm’s corporate and investment banking units, one of the people said.
Bank of America fell 3 cents to $6.98 at 12:24 p.m. in New York Stock Exchange composite trading. The lender has fallen 28 percent this month through yesterday, compared with the 21 percent decline in the 24-company KBW Bank Index.
Tough to Manage
“This obviously is a challenging time for our company in the markets, and for our shareholders,” Moynihan, 51, said in the memo. “I know it is tough to have to manage through reductions, but we owe it to our customers and our shareholders to remain competitive, efficient and manage our expenses carefully.”
The 50 largest banks around the world announced almost 60,000 job reductions through the first week of August, the fastest rate since 2008, according to data compiled by Bloomberg. HSBC Holdings Plc said this month that its target was to reduce 30,000 positions, the largest announcement this year. Companies are restructuring businesses to improve profitability as the U.S. economy stagnates and regulators push firms to hold more capital.
Still No. 1
Even after the job cuts announced yesterday, Bank of America would remain the biggest employer among U.S. banks. San Francisco-based Wells Fargo and Co., which has the largest branch network, and New York-based Citigroup Inc. (C) are next largest, with more than 260,000 employees each at the end of June. JPMorgan Chase & Co. (JPM), the most profitable U.S. bank, had about 250,000 workers.
Bank of America must “adjust to reality -- with weaker revenues and weaker margins, they’ve got to cut costs,” said John Wadle, the Hong Kong-based head of regional banks at Mirae Asset Securities (HK) Ltd. “The investment-banking business is weak because of very unstable financial markets, and the flat yield curve will make margins more difficult.”
Job cuts in Bank of America’s investment banking and trading division run by Thomas K. Montag are part of an annual review of his workforce, said one of the people. The business has been trimming staff in the U.S. while bolstering headcount overseas, Moynihan has said.
Merrill’s Help
The investment bank and wealth management units acquired in the 2009 acquisition of Merrill Lynch & Co. have propped up Bank of America. The two divisions generated about $4.7 billion in earnings in the first half of this year, while the overall company posted a $6.8 billion loss on $20.7 billion in second- quarter mortgage charges.
“While the markets reflect many economic factors we cannot control, we must stay focused on what we can control,” Moynihan said in the memo. “Over time, higher net income and a rising stock price will surely follow.”
Bank of America had $68.9 billion in non-interest expenses in 2010, a 7.7 percent increase from the year before, excluding a one-time credit-card unit writedown and merger costs. The firm’s handle on expenses wasn’t “good enough,” and costs may be cut by $1.5 billion a quarter, Moynihan said this month.
The CEO has sold more than 20 assets or units amid investor concern that mortgage losses may force him to raise capital to comply with new international capital standards. He has repeatedly said that the firm will not need to issue new stock. The divestitures raise cash and reduce assets deemed risky by regulators.
Credit-Card Sale
This week, the bank agreed to sell its Canadian credit-card unit to Toronto-Dominion Bank (TD) for C$7.5 billion in cash, while releasing C$1.1 billion in liabilities, and said it will exit the U.K. and Irish card markets. That may result in more dismissals if Bank of America can’t find a buyer for those European units, with a combined $19 billion in credit-card loans and more than 4,000 employees.
The lender is also in talks to sell real-estate investments held by its Merrill Lynch unit to Blackstone Group LP for as much as $1 billion, a person with knowledge of the matter said earlier this week.
“We have important work to do to continue putting Countrywide’s legacy mortgage issues behind us, and building the capital we will need to meet new regulatory requirements and the market’s expectations in coming years,” Moynihan said.
To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net
To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net
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