published Saturday, September 10th, 2011

BofA proposes staff cuts reaching 40,000

Customers use ATMs at a Bank of America branch in Boston in 2009. (AP Photo)
Customers use ATMs at a Bank of America branch in Boston in 2009. (AP Photo)
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LOS ANGELES — Bank of America Corp. is preparing to slash 40,000 or more jobs nationwide, a dramatic retrenchment that reflects the deepening woes of the country’s largest bank and the magnitude of the U.S. economic slowdown.

The layoffs will come mainly from the Bank of America’s sprawling consumer-banking operations.

Bank of America has 45,000 employees in the state, about 1 in 6 of its nearly 300,000-person workforce, and is expected to roll out the job cuts over the next several years. The company also is in the process of closing 10 percent of its branches nationwide.

The details of the cutbacks were not officially announced, but the information was disclosed by three Bank of America executives who have been briefed on the plan but were not authorized to speak publicly. Brian Moynihan, Bank of America’s beleaguered chief executive, is expected to unveil details at an investor conference Monday in New York.

Investors sent Bank of America shares down 3.1 percent to $6.98 on Friday on a day banks led the overall market sharply lower on more worries about global economies falling into a recession. The Dow Jones industrial average fell 303.68, or 2.7 percent, to 10,992.13

Executives met at the bank’s Charlotte, N.C., headquarters Thursday and Friday to finalize the plan, which has been under discussion for months. Moynihan is grappling with how to wring more profit from the bank’s core customer base, which includes about 58 million consumer and small-business accounts.

At least one analyst said the cutbacks could weigh heavily on Bank of America’s millions of customers, who would have to deal with fewer branches and longer lines for tellers.

“You’re definitely going to see decreased service levels for consumers,” said Christopher Whalen, a bank analyst at Institutional Risk Analytics. “They’re talking about either closing branches or reducing the head count in the branches.”

Moynihan hopes to fashion a smaller but more focused company that can withstand the fallout from its disastrous 2008 takeover of mortgage lender Countrywide Financial Corp. in Calabasas. The home-lending unit has run up $30 billion in losses, and faces billions more in potential liability from a barrage of mortgage-related lawsuits.

Federal regulators and private investors allege that Countrywide misled them about the quality of loans and bonds tied to high-risk mortgages bought during the housing boom. Earlier this month, federal regulators sued Bank of America and 16 of its rivals, contending that the banks sold loans to housing goliaths Fannie Mae and Freddie Mac under false pretenses.

Bank of America’s retrenchment is also being driven by the slack U.S. economy and darkening outlook for the banking industry. Intensifying worries about its prospects have cut Bank of America’s stock price by more than half since mid-January, a far larger hit than its peers have suffered.

“The financial-services industry as a whole is going to shrink,” said Nancy Bush, a banking analyst and contributing editor at research firm SNL Financial. “We don’t need as many loans, as many credit cards, as many mortgages as we did in the past two decades.”

The flailing economy has struck particularly hard at Bank of America, which critics say has been beset by poor management and a flawed growth strategy of rapid-fire acquisitions of other companies. To overcome its woes, Bank of America executives have worked for much of the past year on the ambitious restructuring known as Project New BAC, a reference to the ticker symbol for the company’s stock.

Moynihan has made a number of bold steps in recent weeks, including signing on billionaire Warren Buffett as a major shareholder. This week he ousted two senior executives, including Sallie Krawcheck, one of the highest-ranking women on Wall Street.

The first phase of New BAC is designed to streamline the consumer businesses, including home loans, credit cards and wealth management. It also will make cuts in the corporate support staff, such as legal, marketing, human relations and finance employees.

The bank previously had announced another 6,000 job cuts this year and has closed, sold or put on the auction block former Countrywide divisions that made loans through independent brokers, bought loans from smaller lenders and sold specialty insurance.

Critics have urged Moynihan to go even further as he launches a second phase of the BAC project, which will analyze potential cost cuts and restructurings at some of the business lines focused on corporate and institutional clients.

Some critics suggest Moynihan should put Countrywide, which still has a separate identity, into bankruptcy to stem lawsuits. There has also been talk of Bank of America selling all or part of its Merrill Lynch operation, which it bought during the financial crisis.

The company has in the past denied that either of these options is under consideration. A spokesman for the company declined to comment.

Shareholders said they would be watching the developments carefully, noting that Moynihan has been battling a credibility problem since he pledged to raise the dividend and then failed to follow through when regulators objected.

“It’s been painful,” said Jonathan Finger, who runs a Houston financial firm with a major investment in Bank of America. “He’s got to make the public and investors comfortable that the company is going to be strong and is going to be around.”

Finger and others believe that the cutbacks stem from Moynihan’s desire to show Wall Street he is aggressively addressing the bank’s problems.

Bank of America is the nation’s largest bank as measured by loans and other assets. But in a measure of its financial afflictions, its stock market value, at about $71 billion on Friday was less than Wells Fargo’s $124 billion and Chase’s $125 billion.

“Their competition is not standing still — they’ve got to have a plan to continue to grow and build the business,” Finger said.

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Nathaniel Popper of the Los Angeles Times contributed to this report from New York.

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JanelU said...

Bank of America is just one of the major banks around the nation that slashed staff amid the continuing credit crunch and downturn in consumer spending. Citigroup has also declared that it might lay off about one percent of its staff throughout the world. That means around 3,000 individuals could find themselves out of work. Layoffs continue to be announced in banks locally and abroad. I read this here: Citigroup could lay off thousands in continued industry turmoil.

November 28, 2011 at 4:24 a.m.
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