BofA to Cut as Many as 12,000 Jobs : * Banking: Disclosure is lower than most estimates of positions to be eliminated after BankAmerica Corp. merges with Security Pacific.
BankAmerica Corp., revealing one of its most closely guarded secrets, said Thursday that it will cut up to 12,000 jobs worldwide within three years after its merger with Los Angeles-based Security Pacific Corp.
A spokesman for the San Francisco-based bank said most of the job losses will be in California, but he provided no specific numbers or locations. The proposed cuts represent about 13% of the combined banks’ current work force of 91,000.
The bank said the actual number of employees who receive pink slips will be less than the 10,000 to 12,000 positions slated for elimination. BankAmerica said job openings created during the past seven months have gone unfilled because of strict hiring limits in recent months.
The merger, which will create the nation’s second-largest bank, was announced in August. Since then, BankAmerica had declined to disclose how many jobs would be cut, saying that the decision was still being made.
Cutting staff represents the main way BankAmerica plans to meet its stated goal of lopping off $1.2 billion in annual costs within three years. Sixty percent of the savings is expected to come from personnel reductions.
The number of cut positions disclosed Thursday is at the lower end of estimates by outside consultants and analysts, who had predicted job losses could be as high as 20,000. At one point last fall, the banks were using an internal working number of about 18,000, or 20% of their combined workers. Bank sources have characterized that number, however, as an early estimate that has since been discarded.
Still, some analysts said the latest projections may be just a base level. They said Thursday’s estimate probably represents redundant jobs that clearly can be eliminated--such as those now done by two people at separate banks that can be done by one in a merged institution.
Some suggested that BankAmerica is setting a conservative target so it can easily meet the cost-cutting projections it has set for Wall Street. They added that further job cuts could come after the two organizations combine and executives discover areas where operations can be further tightened.
“It’s a long and arduous process. Some places to cut are not apparent at first. You then have to challenge all sorts of sacred cows and shoot a few,” said Joel P. Friedman, a partner in the San Francisco office of Andersen Consulting.
BankAmerica also did not specify Thursday how the job cuts would be divided between the employees of the two banks. BankAmerica executives have vowed not to favor their own workers over Security Pacific’s in considering job applicants.
Analysts and consultants believe that Security Pacific will feel the cuts more, and that Southern California is the region most likely to be hurt most by the job losses because San Francisco will serve as the administrative hub of the new bank. The layoffs are coming on top of other job cuts in financial services and aerospace that have hit the area lately.
David Hensley, director of the UCLA Business Forecasting Project, said the numbers are not as bad as he feared, but still are a substantial hit for the local economy because workers will find it hard to find new jobs.
“The lion’s share presumably would occur in Southern California, and probably a lot of it in L.A. It’s still a substantial blow,” Hensley said.
Although BankAmerica’s announcement said the jobs would be eliminated within three years, most analysts expect the bank to move fast so it can achieve its projected savings.
The projection on job cuts does not include operations that the two banks are divesting to ease antitrust concerns of the U.S. Justice Department and officials in various states. As an example, about 4,000 people work in branches being sold in the West for antitrust reasons. BankAmerica said the acquiring companies, which include such institutions as U.S. Bancorp and Union Bank, are retaining most of those employees.
For workers who lose their jobs, BankAmerica has in place an extensive severance program, which gives employees three weeks of pay for each year of service, with a maximum of 18 months pay. The plan includes such features as an $8-million fund for loans to laid-off employees who start their own businesses, up to $30,000 in pay for six months for workers who go to work for nonprofit organizations and tuition money for retraining.
In a separate development, the Federal Reserve Board, which still must approve the deal, is expected to take up the merger behind closed doors on Monday, although there is no assurance Fed governors will vote on the deal that day.
The merger, valued at more than $4 billion, is the biggest bank combination in U.S. history and will create a bank with about $185 billion in assets. BankAmerica will be second only in size in the United States to New York’s Citicorp.
BankAmerica closed up $1 a share to $44 in trading on the New York Stock Exchange. Security Pacific closed at $38, up 75 cents.
