BankAmerica Says It Will Cut Up to 3,750 Jobs to Boost Profit : Banking: Company blames the recession for thin earnings. Analyst cites the lingering effect of the Security Pacific merger.
BankAmerica Corp., seeking to boost profit tamped down by the sluggish economy, told employees that it will eliminate 3,000 to 3,750 more jobs worldwide by the end of 1994.
The San Francisco-based banking concern, which has cut the equivalent of 8,000 full-time jobs since its $4-billion merger with Security Pacific in 1992, said about half the workers affected by this new round will probably find positions elsewhere within the company as other employees retire or leave.
As a result, the actual number of layoffs at the nation’s second-largest bank will be closer to 1,500 to 1,875, out of current employment of about 98,000. With those reductions and other cost-cutting measures, the company expects to shave $250 million a year from its annual expenses of about $6.5 billion.
Noting that profit has been constrained by the prolonged recession and heightened competition, Chairman and Chief Executive Richard M. Rosenberg told employees in a newsletter dated Thursday that the bank’s two key challenges are “increasing earnings per share and matching or beating the competition on certain key ratios.”
“We don’t see the economic picture improving appreciably in the near future,” Rosenberg said.
Despite BofA’s significant progress in cleaning up problem loans, the company’s earnings-per-share have languished in the range of $1.19 to $1.22 since the merger. Its stock has been one of the banking sector’s worst performers this year.
The shares slipped 25 cents Friday on the New York Stock Exchange, closing at $43.25. The stock has slumped from a high of $55.50 earlier this year.
On Wednesday, BankAmerica reported net income for the third quarter of $486 million, up only 2% from the same period last year. The earnings would have been slightly higher except for a $26-million onetime charge for employee bonuses.
One significant factor that enabled the bank to report continued earnings growth was a $66-million reduction in the reserve against loan losses.
“The business is fine, but as far as productivity goes, (Bank of America) is only average,” said Campbell K. Chaney, a banking analyst at Dakin Securities Corp., a San Francisco investment firm. “They’re still working on the integration of Security Pacific.”
BofA spokesman John Keane emphasized that no further cutbacks are expected at the bank’s 1,000 retail branches in California. The state’s branch network has been scaled back dramatically since the merger, when BofA and Security Pacific together had nearly 1,500 outlets.
BankAmerica operates in 10 Western states and 37 countries, but about half its employees are in California.
The companywide layoffs will be determined on a unit-by-unit basis, said Kathleen Burke, the bank’s chief of personnel. She added in a telephone interview that the bank expects the cutbacks to bring its staffing into line with “the level of anticipated revenues . . . and the business outlook.”
Laid-off workers will be eligible for a severance package that includes funds for retraining or education.
