Amid the banking industry's relentless belt-tightening, even Bank of America Corp.'s moneymakers aren't safe.
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 bank employed 278,700 people as of March 31.
The move is the latest effort by Chief Executive Brian Moynihan to show investors he can bring expenses under control at a time of sluggish U.S. growth and revenue-reducing federal regulations. Personnel expense at Bank of America rose 17% between 2009 and 2011--a period in which revenue dropped 22%.
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.
Other banks such as UBS AG and Goldman Sachs Group Inc. also are struggling to bring down costs and retain talent. In the second half of 2011, two dozen global financial firms set plans to cut 103,000 jobs.
Some of Bank of America's cuts are part of a multiyear overhaul called Project New BAC, after the bank's ticker symbol. The bank has told regulators it could sell off parts of its U.S. franchise or its U.S. trust business if economic conditions were to worsen significantly, according to people familiar with the situation.
Bank of America declined to comment.
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.
Many Merrill Lynch holdovers, particularly in London, left in the wake of the 2009 takeover by Bank of America, and some of the company's top leaders within investment banking now have no ties to either Merrill or the old Bank of America.
In the past month, several high-profile Merrill veterans departed as it became clear they wouldn't hold high-profile spots following the company's reorganization of that unit. One of those who left was key international deal maker Andrea Orcel, who in April joined UBS.
The defection comes as Bank of America, which has long focused on the U.S., tries to establish itself as a major deal maker around the world. The loss of Mr. Orcel could be damaging if his clients desert Bank of America.
Several other former colleagues of his based overseas have also left to join UBS since his departure, which has riled his former employer, according to a person familiar with the situation. Orcel was among those responsible in recent years for bringing in more than $200 million in annual fees from a group of roughly 20 clients, such as UniCredit SpA, where Orcel has close-knit relationships, according to people familiar with the bank.
International growth remains a major priority for Thomas Montag, who oversees all Bank of America's corporate and institutional clients.
Montag told his managing directors in 2009 that he wanted the bank to make half its big corporate loans abroad in the coming years. Bank of America Merrill Lynch hit that target at the end of 2011, as non-U.S. large corporate loans increased to 50% of all corporate loans, up from 39% in 2010.
Bank of America has been pushing deeper into emerging markets and taking on assignments it once might have rejected as too risky. One example of an emerging-markets deal done under Orcel that the pre-Merrill Lynch company likely wouldn't have touched was the 2010 initial public offering of Russian aluminum company UC Rusal Ltd., a person familiar with the matter said. At Orcel's prodding, Bank of America also boosted its country-lending limit for Russia to $5 billion from $50 million. The bank also has lifted limits in other countries, such as China and India.
Bank of America still lags behind rivals in several key markets overseas, even though it is ranked No. 2 globally by investment-banking revenue. It was No. 6 in investment banking revenue in Europe during the first quarter of 2012, and not in the top 10 in Asia Pacific excluding Japan, according to Dealogic, a financial data company. Last week, Bank of America lost the top executive of its Chinese investment banking operations when Erh Fei Liu left to run a BlackRock Inc.-led fund focusing on overseas investments. Liu was also a veteran of the old Merrill Lynch.
Bank of America is hiring, too, just last week adding Alex Wilmot-Sitwell as one of its top executives in London.
In the latest round of cuts, less than 400 will come from investment banking, corporate banking, sales and trading, the people familiar with the matter said. An expected sale of the bank's non-U.S. wealth-management operations in Asia, Latin America and Europe would eliminate less than 2,000 positions.
The bank is trying to sell that unit, which reports to Montag, because it lacks scale. The businesses managed by Montag employ about 20,000 people in total.
An additional layer of cuts is also expected in the U.S. wealth-management business, which manages money for affluent people and reports to co-chief operating officer, David Darnell.
The cuts in Montag's business won't be deeper in part because the bank needs to make headway in Europe and other overseas markets, said one person familiar with the matter. Higher-performing businesses such as fixed-income trading also will be largely spared, this person added.
This story first appeared on WSJ.com
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