BofA to cut at least 40,000 jobs
Bank of America Corp. is preparing to slash 40,000 or more jobs nationwide, a dramatic retrenchment that reflects the deepening woes of the country’s largest bank and the magnitude of the U.S. economic slowdown.
The layoffs will come mainly from the BofA’s sprawling consumer-banking operations, which will take a heavy toll on branches, loan centers and other offices throughout California.
Bank of America has 45,000 employees in the state, about 1 in 6 of its nearly 300,000-person workforce, and is expected to roll out the job cuts over the next several years. The company, which for years was based in San Francisco and maintains its huge mortgage unit in Calabasas, also is in the process of closing 10% of its branches nationwide.
California has the highest concentration of BofA branches in the U.S. with 956 throughout the state, though it has been losing ground in recent years to rivals like Wells Fargo & Co. and JPMorgan Chase & Co.
The layoffs are another blow to California, with its battered economy and nearly 12% unemployment rate. From tellers to middle managers, laid-off Bank of America employees are likely to have a tough time finding new jobs.
“We don’t need to lose any jobs in this environment, whether in financial services or anywhere else,” said Esmael Adibi, a Chapman University economist.
The details of the cutbacks were not officially announced, but the information was disclosed by three Bank of America executives who have been briefed on the plan but were not authorized to speak publicly. Brian Moynihan, Bank of America’s beleaguered chief executive, is expected to unveil details at an investor conference Monday in New York.
Investors sent shares of the BofA down 3.1% to $6.98 on Friday on a day banks led the overall market sharply lower on more worries about global economies falling into a recession. The Dow Jones industrial average fell 303.68, or 2.7%, to 10,992.13
Executives met at the bank’s Charlotte, N.C., headquarters Thursday and Friday to finalize the plan, which has been under discussion for months. Moynihan is grappling with how to wring more profit from the bank’s core customer base, which includes about 58 million consumer and small-business accounts.
At least one analyst said the cutbacks could weigh heavily on BofA’s millions of Southern California customers, who would have to deal with fewer branches and longer lines for tellers.
“You’re definitely going to see decreased service levels for consumers,” said Christopher Whalen, a bank analyst at Institutional Risk Analytics. “They’re talking about either closing branches or reducing the head count in the branches.”
Moynihan hopes to fashion a smaller but more focused company that can withstand the fallout from its disastrous 2008 takeover of mortgage lender Countrywide Financial Corp. in Calabasas. The home-lending unit has run up $30 billion in losses, and faces billions more in potential liability from a barrage of mortgage-related lawsuits.
Federal regulators and private investors allege that Countrywide misled them about the quality of loans and bonds tied to high-risk mortgages bought during the housing boom. Earlier this month, federal regulators sued Bank of America and 16 rivals, contending that the banks sold loans to housing goliaths Fannie Mae and Freddie Mac under false pretenses.
Bank of America’s retrenchment is also being driven by the slack U.S. economy and darkening outlook for the banking industry. Intensifying worries about its prospects have cut Bank of America’s stock price by more than half since mid-January, a far larger hit than its peers have suffered.
“The financial-services industry as a whole is going to shrink,” said Nancy Bush, a banking analyst and contributing editor at research firm SNL Financial. “We don’t need as many loans, as many credit cards, as many mortgages as we did in the past two decades.”
The flailing economy has struck particularly hard at Bank of America, which critics say has been beset by poor management and a flawed growth strategy of rapid-fire acquisitions of other companies. To overcome its woes, BofA executives have worked for much of the past year on the ambitious restructuring known as Project New BAC, a reference to the ticker symbol for the company’s stock.
Moynihan has made a number of bold steps in recent weeks, including signing on billionaire Warren Buffett as a major shareholder. This week he ousted two senior executives, including Sallie Krawcheck, one of the highest-ranking women on Wall Street.
The first phase of New BAC is designed to streamline the consumer businesses, including home loans, credit cards and wealth management. It also will make cuts in the corporate support staff, such as legal, marketing, human relations and finance employees.
The bank previously had announced another 6,000 job cuts this year and has closed, sold or put on the auction block former Countrywide divisions that made loans through independent brokers, bought loans from smaller lenders and sold specialty insurance.
Critics have urged Moynihan to go even further as he launches a second phase of the BAC project, which will analyze potential cost cuts and restructurings at some of the business lines focused on corporate and institutional clients.
Some critics suggest Moynihan should put Countrywide, which still has a separate identity, into bankruptcy to stem lawsuits. There has also been talk of BofA selling all or part of its Merrill Lynch operation, which it bought during the financial crisis.
The company has in the past denied that either of these options is under consideration. A spokesman for the company declined to comment.
Shareholders said they would be watching the developments carefully, noting that Moynihan has been battling a credibility problem since he pledged to raise the dividend and then failed to follow through when regulators objected.
“It’s been painful,” said Jonathan Finger, who runs a Houston financial firm with a major investment in BofA. “He’s got to make the public and investors comfortable that the company is going to be strong and is going to be around.”
Finger and others believe that the cutbacks stem from Moynihan’s desire to show Wall Street he is aggressively addressing the bank’s problems.
BofA is the nation’s largest bank as measured by loans and other assets. But in a measure of its financial afflictions, its stock market value, at about $71 billion on Friday was less than Wells Fargo’s $124 billion and Chase’s $125 billion.
“Their competition is not standing still — they’ve got to have a plan to continue to grow and build the business,” Finger said.
Times staff writer Nathaniel Popper contributed to this report.
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