NEW YORK (TIP): Bank of America Corp. is accelerating a broad cost-cutting plan and has set a target of shedding 16,000 jobs by year’s end-cuts that would see the company relinquish its title as U.S. banking’s largest employer.
Daniel Fitzpatrick reports on Markets Hub.
The reductions for the final six months of the year, outlined in a document given to top management, are part of a larger effort to retool Bank of America into a leaner and more focused enterprise. The plan is designed to make the company take less risk, generate more revenue out of existing customers and use an investment banking operation inherited from Merrill Lynch & Co. to become a major deal maker around the world.
On Main Street, the refocused company will have fewer branches and a smaller mortgage operation, the document shows.
The proposed year-end total of 260,000 would be the lowest count since 2008 and likely give Bank of America a smaller workforce than J.P. Morgan ChaseJPM -0.87% & Co., Citigroup Inc. C -1.02% or Wells FargoWFC -0.40% & Co. The final year-end number could still fluctuate depending on business volumes, said a person familiar with the plans. Bank of America is the second-biggest bank by assets after being surpassed by J.P. Morgan last year.
Chief Executive Brian Moynihan is trying to speed the company’s transformation into a smaller and more efficient operation as he tries to persuade investors that expenses can be adjusted to compensate for revenue lost to new regulations, an uneven economy and shaky markets. Since becoming CEO in 2010, he has shifted away from a nationwide expansion strategy embraced by his predecessors Hugh L. McColl Jr. and Kenneth D. Lewis, and shed many of the businesses that he considers to be nonessential.
Those include several international credit-card units, private-equity holdings, an insurance unit and stakes in overseas banks.
As a result, total assets have dropped by 7%, to a recent $2.16 trillion.
The company’s shares are up 69% this year but have dropped 37% since Mr. Moynihan took over for Mr. Lewis in 2010.
Hitting the new staffing target would fulfill a year early Mr. Moynihan’s pledge to slash the bank’s workforce by approximately 30,000.
“If they want to make any headway toward improving profitability,” said Sterne Agee & Leach Inc. senior banking analyst Todd Hagerman, “they need to accelerate the timeline.”
A Bank of America spokesman declined to comment.