Bank of America Corp. (BAC) Chief Executive Officer Brian T. Moynihan told his managers at the biggest U.S. lender to expect 3,500 job cuts this quarter. And published reports claim the total could ultimately top 10,000.
Some employees have already been informed of the firings, which are in addition to 2,500 reductions made this year, Moynihan said in a memo to staff yesterday. The cuts aren't part of the Charlotte, North Carolina-based firm's expense-trimming effort called Project New BAC, according to the document.
Moynihan is under pressure to reduce outlays at the bank, whose market value has plunged by almost half this year, as costs tied to the 2008 takeover of subprime lender Countrywide Financial Corp. mount and revenue shrinks amid signs of a U.S. slowdown. He has booked about $30 billion in charges on housing- related liabilities since taking over at the start of 2010.
“They have to adjust to reality. With weaker revenues and weaker margins, they've got to cut costs and reduce bonuses,” John Wadle, the Hong Kong-based head of regional banks at Mirae Asset Securities (HK) Ltd., said by telephone. “‘Clearly the investment banking business is weak because of very unstable financial markets and the flat yield curve will make margins more difficult in the short term.”
The 50 largest global banks announced almost 60,000 job reductions through the first week of August, the fastest rate since 2008, according to data compiled by Bloomberg. Regulators are pushing firms to hold more capital, and companies are restructuring businesses to improve profitability as the U.S. economy stagnates.
Challenging Time
Shares of Bank of America fell 6 percent to $7.01 in New York yesterday, extending its decline this year to 47 percent, amid investor concern that the lender's mortgage liabilities will continue to swell.
“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 bank is likely to eliminate at least 10,000 jobs, the Wall Street Journal reported earlier today, citing a person it didn't identify. The New York Times also indicated that at least 10,000 positions might be eliminated.
Final Review
Scott Silvestri, a Bank of America spokesman, declined to comment. The management team will meet for a final review to consider more changes in early September, Moynihan said in the memo.
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.
Moynihan has been selling assets including First Republic Bank and a stake in
BlackRock Inc. to focus on corporate borrowers, investment banking and U.S. retail clients and to comply with new international capital standards. The company agreed this week to sell its Canadian credit-card unit to Toronto-Dominion Bank (TD) for $7.6 billion.
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 in the memo.
--Bloomberg News--
