Bank of America (BofA), the biggest US lender, may try to cut costs by 20 per cent in consumer banking with measures that include thousands more job cuts, said two people with direct knowledge of the firm’s efforts.Executives working on the cost-cutting plan, dubbed Project New BAC, set preliminary goals during their review of deposit, mortgage and card units, said the people, who declined to be identified because the talks are private. The consumer businesses comprise the largest division with about $30 billion in expenses last year.“They’ve got to right-size expenses to match known revenues, and there’s no other way to do it but with job cuts,” said Greg Donaldson, chairman of Evansville, Indiana-based Donaldson Capital Management, a firm with $500 million in assets that sold its Bank of America stock this year.Chief Executive Officer Brian T. Moynihan is under pressure to reduce expenses after the bank’s shares plunged almost 50 per cent this year. He’s booked about $30 billion in costs tied to home loans since replacing Kenneth D. Lewis in 2010, mostly because of the 2008 takeover of subprime lender Countrywide Financial Corporation The company’s workforce of 287,839 at midyear was the largest among US banks.The savings are likely to be achieved in part through thousands of job cuts beyond the 6,000 disclosed so far this year, said the people. The Charlotte, North Carolina-based lender may eliminate at least 10,000 positions, the Wall Street Journal reported. Scott Silvestri, a Bank of America spokesman, declined to comment on Project New BAC, the initials in the company’s stock ticker.
Managers will conduct a final review for the first stage of Project New BAC in early September, Moynihan said in Aug.18 memo. The company will examine cost-cutting at corporate and investment banking units later this year after making trims in consumer banking and support staff such as human resources, said one of the people.
Moynihan has said he will disclose details regarding Project New BAC during the third-quarter earnings conference call in October. He told investors on Aug.10 that money saved from the initiative “will be both material and substantial.” Bank of America fell 4 cents to $6.97 in New York Stock Exchange composite trading. That left the shares down 48 per cent this year, double the drop for the Standard & Poor’s 500 Financials Index.
“This obviously is a challenging time for our company in the markets, and for our shareholders,” Moynihan, 51, said in the memo. “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.”
The 50 largest banks around the world announced almost 60,000 job reductions through the first week of August, the fastest rate since 2008, according to data compiled by Bloomberg. HSBC Holdings Plc said this month that its target was to reduce 30,000 positions, the largest announcement this year. Companies are restructuring businesses to improve profitability as the US economy stagnates and regulators push firms to hold more capital.
From / Gulf Today