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 shares down more than 50 percent since January, the cuts by Bank of America may be only the start of a broader restructuring at the company, which is the nation’s largest bank. Chief executive Brian Moynihan has said he hopes to trim quarterly expenses by US$1.5 billion. Thousands more job cuts are likely in the months ahead.
“I know it is tough to have to manage through reductions, but we owe it to our customers and our shareholders to remain competitive, efficient and manage our expenses carefully,” Moynihan wrote in a memo to the company’s senior leadership late on Thursday that outlined the cuts.
In the memo, obtained by the New York Times, Moynihan said the company’s broader revamping effort is nearing completion of its first phase, which examines the consumer business and support functions. A 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.
Moynihan said in the memo that 3,500 employees are already being told their jobs are to be eliminated and that the reductions would come throughout the company. Bank of America, which has about 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 by the bursting of the housing bubble and the surge in foreclosures. It has already sustained tens of billions of 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 past 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 Pacific Investment Management Co, BlackRock and the Federal Reserve Bank of New York — US$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 Moynihan to put Countrywide’s disastrous legacy behind the company, investors remain skeptical.
This month, American International Group, the giant insurer, filed a suit against the company over mortgage-backed securities it assembled and investors fear the June settlement may actually spurt more litigation, rather than resolve it.
The latest job cuts, which were first reported on the Wall Street Journal’s Web site late on 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.
Since the beginning of the year, Bank of America shares have fallen from US$15 to a closing price of US$7.01 on Thursday.
“While the markets reflect many economic factors we cannot control, we must stay focused on what we can control,” Moynihan said in the memo.