Layoffs Watch '12: Bank Of America

Author:
Bess Levin
Updated:
Jan 14, 2019
Original:
Jan 30, 2012

BofA may not yet be done implementing all the ideas Team Project New BAC came up with after “fanning out around the company to ask employees low-and high-level for ideas on [how to] reduce expenses."

"Supposedly the major strategic outlines of Project New BAC for the I-bank have been decided upon, with significant (i.e. WARN-worthy) cuts to go down circa April in context of a major realignment/reshuffling of coverage/product groups. Hence Moynihan's ominous comment during earnings that we should see the results of major savings, in range of $3 billion, around the 2nd half."

News

In April 2010, Bank of America said ENOUGH. Enough with this losing of money business. We want to know what it's like to have a quarter in which we actually make a little-- wouldn't that be something? As this was a very lofty goal for the firm, the higher-ups knew they had to get serious-- really focus and hone in an on plan of action. First, they gave their new (money-making) mission a special codename: Project New BAC. Then, 44 executives "fanned out around the company to ask employees low- and high-level for ideas on how BofA [could]...reduce expenses." As we now know, what they came up with re: the reduction of expenses was that 30,000 people should be fired and over the last year, exactly that has happened. And even though a whole bunch of senior people have quit, which has helped the bottom line a bit, it hasn't been enough for meddlesome investors to put a sock in it re: "reining in expenses" and "profit outlook" in general. So, a couple things are going to happen: 1. A whole bunch of well-paid* bankers are going to be escorted out of the building and 2. In order to pick up the slack left, clusters of junior bankers are going to put in a van which will drop them off in whatever division needs them most at the time. The Charlotte, N.C., company is planning about 2,000 staff cuts in its investment banking, commercial banking and non-U.S. wealth-management units, said people familiar with the situation. Those operations were vastly expanded with Bank of America's 2009 purchase of Merrill Lynch & Co. The reductions are significant because of whom they target: the high-earning employees whose efforts helped Merrill Lynch account for the bulk of Bank of America's profit since the financial crisis. The cuts come on top of a plan announced last year that will see Bank of America eliminate 30,000 jobs over three years in its consumer banking divisions...The No. 2 U.S. bank by assets already is facing a wave of high-profile defections in its institutional businesses, such as investment banking, amid Wall Street's annual post-bonus job-hopping season. The upheaval comes as investors are pressuring banks to rein in expenses without giving ground competitively. Despite a 46% rise this year, Bank of America shares have lost a third of their value in the past year, amid questions about the industry's profit outlook. Cutbacks aren't Bank of America's only response to surging costs. The bank is loath to cut too deeply in businesses, such as the fixed-income trading operation, that are showing improvement and highly competitive. One structural shift being planned will pool junior investment-banking employees across different industry sectors so the younger bankers can be routed to whatever area is most in demand at that moment, said people familiar with the situation. Proponents say that move will help younger workers gain more experience, while others say it will detract from the bank's service to clients. BofA To Cut From Elite Ranks [WSJ] *For BofA.

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More cuts are expected at the House of Moynihan this week. "Project New BAC axe is rumored to be coming out tomorrow. Expecting major headcount reduction in Equity Sales + Trading amongst other things."

News

...needs a few more years to get through its "cost-cutting initiative." Head count dropped by 3,000 from last quarter, the bank said today. Bank of America this quarter entered the second phase of "Project New BAC," its companywide cost-cutting initiative, targeting a $5 billion reduction in spending by the bank by the end of 2014. Some of that will come from job cuts, the bank has said, as it plans to reduce the number of positions at the bank by 30,000 over the next three years...The current phase of New BAC will be focused on saving money in its commercial banking, global wealth and investment management, world-wide corporate banking, global markets and some support functions. The spokesman could not confirm that future reductions will be limited only in these businesses, as "some of the ideas that came from Phase 1 will take a number of years to implement." [FINS]

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Project New BAC continues at apace. "Cuts going down this morning in all areas of BofA equities. MDs and directors so far."

News

Project New BAC continues, only now that it's worked out some of the initial kinks, management is going to fire people a lot faster that before. Chief Executive Officer Brian T. Moynihan, 52, is relying on expense cuts to improve profit as mortgage losses and regulation squeeze revenue. The earlier phase of his efficiency plan, called Project New BAC, targeted $5 billion in costs and 30,000 jobs...The lender had 275,460 employees at June 30, compared with 278,688 on March 31 and about 288,000 at the end of last year’s second quarter. The number of banking centers in the U.S. fell by 148 in the 12 months ended June 30 to 5,594...The new round of cost cuts will come at a faster rate than the first phase, Chief Financial Officer Bruce Thompson said today on the call. The $3 billion in savings will probably be realized at about $1 billion per year, he said. Moynihan told employees in January that he expected Project New BAC to eliminate a total of $6 billion to $8 billion a year in expenses, Bloomberg News reported. The bank said today it’s on track to realize $1 billion of the cost savings from the first phase by the end of this year. [Bloomberg]

News

On the one hand, Brian Moynihan et al plan to cut staff next month, which hurts. On the other, they've been firing off warning signals that employees may want to explore their options elsewhere, so that's nice. "Ahead of expected cuts at the House of Moynihan in the Apr-May timeframe, a lot of juniors are being pulled into conference rooms and told it might be in their interest to "reach out and have a chat" with other groups. Reshuffling and reallocation are well underway. No rhyme or reason as far as we can tell regarding why some analysts and associates are being nudged and others aren't (some top bucketed guys got nudged, and some bottom feeders got nudged as well)."

News

The aforementioned layoffs are said to begin this week. "FYI: BofA cuts are expected to start Thursday, thought to be 20% across the board in IB. All levels affected but with 2nd and 3rd year VPs who are not going to make director, of which there is a glut, hit especially hard. If you're a first year VP (without acct coverage responsibilities), you're probably going into the superpods."

Layoffs Watch '12: Bank Of America