Rubie Curl-Pinkins alongside her lawyer Vanessa Fluker outside of Bank of America in downtown Detroit. They were fighting Curl-Pinkins' foreclosure by Countrywide, which is now owned by the large financial institution. (Photo: Alan Pollock)., a photo by Pan-African News Wire File Photos on Flickr.
August 19, 2011
Bank of America Plans Big Layoffs to Cut Costs
By NELSON D. SCHWARTZ
Bank of America is set to eliminate at least 3,500 jobs in the coming months, as the beleaguered financial giant seeks to cut costs and restructure amid deepening shareholder dissatisfaction.
With its stock down more than 50 percent since January, the job cuts by Bank of America may be only the start of a broader restructuring at the company, which is the nation’s largest bank. Brian T. Moynihan, the chief executive of the bank, has said that he hopes to trim quarterly expenses by $1.5 billion. Thousands more job cuts are likely in the months ahead.
“I know it is tough to have to manage through reductions,” Mr. Moynihan wrote in a memo to the company’s senior leadership late Thursday that outlined the cuts. “But we owe it to our customers and our shareholders to remain competitive, efficient and manage our expenses carefully.”
In the memo, obtained by The New York Times, Mr. Moynihan said the company’s broader revamping effort was nearing completion of its first phase, which examines the consumer business and support functions. A third and final review is set for early September.
The company plans to announce the first results of that project next month, which could include further job cuts that would total more than 10,000.
Mr. Moynihan said in the memo that the company had already begun to tell the 3,500 employees that their jobs were to be eliminated, and that the reductions would come throughout the company. Bank of America, which has roughly 280,000 employees, cut about 2,500 jobs in the first half of the year.
Even more than its large rivals, Bank of America has been battered particularly hard by the bursting of the housing bubble and the surge in foreclosures. It has already suffered tens of billions in losses tied to its disastrous acquisition in 2008 of Countrywide Financial, the subprime lender that has come to epitomize the excesses of the housing boom of the last decade.
Investors are also pressing the bank to buy back billions of dollars in securities it assembled from mortgages that later soured. In June, it agreed to pay a group of investors including Pimco, BlackRock and the Federal Reserve Bank of New York $8.5 billion to settle a portion of these claims.
While the settlement represented the culmination of months of negotiations and was seen as an attempt by Mr. Moynihan to finally put Countrywide’s disastrous legacy behind the company, investors remain skeptical.
Earlier this month, American International Group, the giant insurer, filed suit against the company over mortgage backed securities it assembled, and investors fear the June settlement may actually spur more litigation, rather than resolve it.
The latest job cuts, which were first reported on the Wall Street Journal’s Web site late Thursday, will also hit the company’s Merrill Lynch unit. Bank of America agreed to acquire the firm at the height of the financial crisis in 2008. While Merrill has proved profitable more recently, trading volumes and the flow of deals have slowed substantially in recent months, making it vulnerable to further job reductions.
Despite the huge settlements and other write-downs, Mr. Moynihan has said that he does not plan to issue more stock to raise new capital. Instead, the company has been engaged in the corporate version of a yard sale in recent weeks, raising billions of dollars as it offloads everything from its Canadian credit card business to several commercial real estate properties.
In the recent market downturn, Bank of America shares have been especially hard hit. Since the beginning of the year, Bank of America shares have fallen from $15 to a closing price of $7.01 on Thursday.
“While the markets reflect many economic factors we cannot control, we must stay focused on what we can control,” Mr. Moynihan said in the memo.