Report: BofA in Midst of New Round of Layoffs
Bank of America Corp (NYSE:BAC) has been cutting jobs in its commercial banking unit in recent weeks even as it tries to boost the group's business, people familiar with the situation said, reflecting the bank's broader struggles to grow in a tepid economy.
The job cuts are the latest round in the bank's cost-cutting program, known as Project New BAC, and focus on the unit that makes loans to mid-sized companies around the country. Analysts expect Bank of America to disclose more about the current round of New BAC when it posts earnings on July 18.
The second largest U.S. bank is cutting bankers and loan processors in commercial banking offices scattered around the country, sources said. Bank of America hasn't disclosed the number of cuts, but one of the people said it was a small percentage of the total unit.
The bank declined to say how many employees it has in commercial banking. In a February 2011 securities filing, it listed 7,100, but some businesses have been moved out of the unit since then.
The cuts came even after Brian Moynihan, Bank of America's chief executive, said publicly that the bank wants to make more loans to small and mid-sized companies.
"We need to see our teams do more work on loan growth," he said at a conference in May.
Bank spokesman Jefferson George said the company regularly reviews its businesses to make sure it can meet client needs and "capture market opportunities." The bank will continue to hire in "growth areas," he added.
Bank of America, like many of its competitors, is slashing costs to boost profits as weak loan demand, new regulations and low interest rates make it difficult to boost revenue.
In the second phase of its Project New BAC cost-cutting program, the bank is eliminating jobs in commercial banking, investment banking, capital markets and wealth management.
In the first phase of New BAC, the bank in September identified 30,000 jobs and $5 billion of annual expenses to cut in consumer banking and information technology.
Bank of America is cutting deeper than many of its rivals as it seeks to streamline after decades of acquisitions. The 30,000 job cuts were the most announced in the United States by any private company since January 2011, according to outplacement firm Challenger, Gray & Christmas Inc.
Bank executives have previously said the second phase of New BAC would yield fewer job cuts than the first wave. Employees in areas like investment banking tend to be paid better than employees in retail banking, so the bank can enjoy bigger cost savings with fewer job cuts.
Barclays analyst Jason Goldberg said in a research report on Monday that he expects the current round of New BAC to cut annual costs by $2 billion to $3 billion.
Besides the cuts in commercial banking, other reductions are also under way. Sources in May told Reuters that the bank planned to eliminate about 300 jobs in its investment banking and capital markets group, partly due to New BAC. <ID: nL1E8G1JSO>
Even before New BAC looked at those businesses, executives were cutting hundreds of jobs in sales and trading functions, citing a decline in market activity due to the European debt crisis.
From the first quarter of 2011 to the first quarter of 2012, the bank's employee count has fallen by about 10,000 to 279,000. The drop would have been nearly 19,000, had the bank not hired roughly 8,400 employees to handle delinquent mortgage loans, Chief Financial Officer Bruce Thompson said last month.
CUTTING TOO MUCH?
Analysts are expecting Bank of America to post earnings of 15 cents per share for the second quarter, according to Thomson Reuters I/B/E/S. That's a major improvement over a loss of 90 cents a share a year ago when the bank set aside reserves for an $8.5 billion mortgage-related settlement.
New BAC expense-cutting could help the bank's results come in better than Wall Street estimates, Keefe, Bruyette & Woods said in a report last month.
But some people close to the bank wonder if it could be cutting too deep.
Earlier this year, for example, the bank eliminated a small number of risk management jobs as it combined two groups that handle loans to large companies.
The move reduces duplicative functions but could potentially weaken checks and balances in the lending process, a person familiar with the matter said. The groups handle the underwriting and approval of loans made through Bank of America's global banking unit. The move was not considered part of New BAC.
Bank of America spokesman Dan Frahm said the bank combined two teams already working closely together to simplify operations. "These two teams continue to have the same core responsibilities, perform the same important functions for global banking and markets and report through the same management," Frahm said.
Bank of America's global banking unit, which includes lending to mid-sized and large companies, had $277 billion in loans at the end of the first quarter, essentially flat from the previous quarter but up about $20 billion from a year earlier.
New BAC, named for the bank's ticker symbol, is expected to continue through 2014.