Bank of America to cut 3,500 jobs
NEW YORK (AP) — Bank of America Corp., the nation's largest bank, said Friday that it plans to cut 3,500 jobs by the end of September.
The cuts amount to a little more than 1 percent of the bank's workforce of roughly 288,000. But they follow a string of other layoffs, including 2,500 already announced this year.
A bank spokesman declined to say if the cuts would be concentrated in a particular part of the country, but said they would be spread across most of the business units.
"The company regularly assesses the efficiency of its businesses and at times is going to make adjustments to meet the opportunities that are in the marketplace," said spokesman Scott Silvestri. The bank has previously cut jobs in the mortgage lending and investment banking, for example, after demand for those services slowed.
Silvestri said the layoffs were not part of "New BAC," a cost-cutting program announced in May.
After this round of layoffs, the bank should have about 284,000 employees. Its roster peaked in early 2009, right after it absorbed investment bank Merrill Lynch and mortgage lender Countrywide Financial, at about 302,000.
The entire banking industry is shrinking, as new regulations and the fallout of the financial crisis force it to become smaller, simpler and less profitable. Many of the complicated investment vehicles that fueled the industry before 2008 are gone, after being blamed for causing the financial crisis.
U.S. banks employ about 2.09 million people, down from 2.21 million people in early 2008, according to data compiled by the Federal Deposit Insurance Corp.
The finance and insurance industry made up about 8 percent of the country's gross domestic product last year, according to the federal Bureau of Economic Analysis. That's in line with where it was in 2007, before the financial crisis took hold.
Like other industries, banking has always ebbed and flowed with the markets. It started laying off investment bankers as the economy began to sputter in 2007. It laid off workers again in 2008 and 2009, as the financial crisis sent many banks into the red and forced them to take government bailouts. But 2010 provided some relief, with shares bouncing back and banks making profits, and banks even hired back some workers.
But now banks are cutting jobs again. Bank of New York Mellon Corp., Goldman Sachs Group Inc. and State Street Corp., among others, have recently announced layoffs.
This latest round is different because it's coming at a time when many banks are actually posting improved profits. Analysts say the latest cuts point to permanent structural changes, not temporary market problems.
The KBW Bank Index has fallen 22 percent this month as of Friday morning, compared to a 12 percent fall in the S&P 500. Bank of America shares have fallen 28 percent.
Investors are worried about banks' exposure to continued problems over soured mortgages and mortgage-backed securities. Though the banks' capital cushions are higher and many are turning profits, it's not known how much they could have to pay to investors who claim they were misled into buying the securities.
Bank of America is especially vulnerable, partly because of its fast expansion during the height of the financial crisis: It's still cleaning up the exotic mortgages of Countrywide, a California-based lender it bought in the summer of 2008. The move propelled the Charlotte bank into the country's biggest mortgage lender, but it has also brought it lawsuits, regulatory probes and quarterly losses.
Some analysts say the bank rushed into buying Countrywide and should have tried to get the government to protect it from Countrywide's worst assets, similar to a deal that JPMorgan Chase & Co. secured when it bought Washington Mutual. Some analysts have wondered whether Bank of America should file for bankruptcy protection for Countrywide, though it's unclear if that's even possible.
Less than three months after the Countrywide purchase, Bank of America also agreed to buy Merrill Lynch. That was a year after Ken Lewis, then Bank of America's CEO, famously declared that he'd already had all the fun he could stand in investment banking after that unit's profits plummeted. Lewis later stepped down over controversy around the Merrill deal.
Brian Moynihan, Bank of America's CEO for a year and a half, is slimming down the bank after his predecessors' years of empire building. He's been cutting expenses, closing branches and selling off assets to build capital. The bank's announcement Monday that it would sell international credit-card units sent the shares soaring 8 percent. The bank points out that its capital levels are high and its default rates are lower.
The bank has lost money in three of the six quarters since Moynihan became CEO, including an $8.8 billion loss in the second quarter as it said aside money for potential claims from mortgage securities investors. Moynihan has been telling shareholders and employees that the bank is in the middle of a transformation that might be painful now but will stabilize it long-term.
"We cannot control the seas around us," Moynihan wrote in a letter to employees last week, "but with the best franchise in the industry, and the best team in place to deliver its benefits to our customers, I am confident we will achieve our goals working together."