Hire Wire Aug 19 2011

Bank of America Cutting 3,500 Jobs, Broader Restructuring to Come

By dan fitzpatrick

Bank of America Corp. is cutting 3,500 jobs in the current quarter and working on a broader restructuring that could eliminate thousands of additional positions, people familiar with the situation said.

The 3,500 positions are spread across the nation's largest bank by assets, including investment banking and trading, and the cuts are expected to be completed by the end of September. Some employees already have been notified.

Thousands of additional reductions are expected as part of an aggressive overhaul known as "Project New BAC," after the Charlotte, N.C., bank's ticker symbol. Executives at the bank still are discussing the possible range of cuts, but one person familiar with the situation said at least 10,000 jobs are likely to be eliminated.

That would amount to 3.5% of the bank's work force.

A final decision about the number isn't expected until early September, these people added.

The reductions come as many other financial firms also are pruning their work forces or cutting expenses elsewhere.

The companywide retrenchment at Bank of America is part of a drastic turnaround effort by Chief Executive Brian Moynihan. He is trying to bolster profits amid swirling concerns about Bank of America's exposure to the slowing U.S. economy and a slew of mortgage-related losses and lawsuits.

Bank of America shares are down 47% so far this year, including a slide of 6% on Thursday. The stock fell 45 cents to $7.01 in New York Stock Exchange composite trading at 4 p.m., and recently sank to levels last seen in early 2009 as the financial crisis was raging.

Mr. Moynihan's goal is to reduce expenses by as much as $1.5 billion per quarter, he told investors earlier this month on a conference call. Bank of America and other big banks are under relentless investor pressure to control expenses in order to offset weak revenue hurt by the sagging economy and new rules.

Bank of America's noninterest expense of $22.9 billion in the second quarter was up 32% from a year earlier. The figure includes employment, occupancy, marketing and other business costs.

"I know it is tough to have to manage through reductions," Mr. Moynihan said in a memo to top managers Thursday night, "but we owe it to our customers and our shareholders to remain competitive, efficient and manage our expenses carefully."

The 3,500 job cuts include hundreds of positions in its investment banking and trading unit. Cuts in that business are expected to amount to 3% to 5% of its employees. Last fall, the investment bank imposed job cuts of about 3%.

The elimination of thousands of additional positions will initially hit consumer banking and mortgage operations, as well as legal, marketing and human resources.

Some jobs could be eliminated through attrition or hiring slowdowns and implemented over a three-year period, a person familiar with the matter said. Bank of America also expects to reduce expenses through a reduction in redundant systems inherited from prior acquisitions.

HSBC Holdings PLC plans to cut about 30,000 jobs world-wide by the end of 2013. Wells Fargo & Co. has said it wants to trim quarterly expenses by $1.5 billion. A wave of additional job cuts is expected at U.S. banks this fall.

Bank of America's last big cutback came in 2008 with the announcement of plans for 30,000 to 35,000 job cuts over three years. The move was triggered by an economic downturn and the takeover of securities firm Merrill Lynch & Co.

Mr. Moynihan recently has assured employees, board members and government officials about the bank's ability to withstand market volatility. Still, Bank of America shares are down 28% this month, and the cost of insuring its bonds against default jumped 14% on Thursday.

Amid the turmoil, Mr. Moynihan is sticking to a strategy he outlined early in his tenure as CEO. He pledged to sell noncore holdings, rid the bank of mortgage problems it inherited with the 2008 acquisition of Countrywide Financial Corp. and reposition the balance sheet to withstand future economic shocks.

To that end, Bank of America announced earlier this week the sale of its Canadian credit-card portfolio to Toronto-Dominion Bank and the exit of U.K. and Ireland credit-card businesses. Bank of America also might sell private-equity real-estate assets to Blackstone Group LP.

On Thursday, Bank of America put insider Ron Sturzenegger in charge of a unit responsible for cleaning up the bank's mortgage mess. Mr. Sturzenegger replaces Terry Laughlin, a longtime ally of Mr. Moynihan who recently moved to the role of chief risk officer.

Mr. Moynihan is modeling the new restructuring after "Fleet Focus '94," a cost-cutting exercise that he was part of during the early 1990s as a new employee with Fleet Financial Group.

Mr. Moynihan was one of 50 executives, nicknamed the "Nifty 50," in charge of the project. Once the job was done, Mr. Moynihan got a promotion that began his rise at Fleet, which was acquired by Bank of America in 2004.

Mr. Moynihan was one of the few top Fleet executives to survive the merger, and he succeeded Kenneth D. Lewis as CEO in January 2010.

At Bank of America, 44 executives are overseeing Project New BAC. The executives are referred to internally as the "catalysts." The group, which includes Mr. Sturzenegger, has spent the past four months reviewing different business lines with the help of consulting firms EHS Partners and Promontory Financial Group.

The first phase of the project began in May and involves an examination of the consumer side of the bank.

Those operations range from retail branches to mortgages to marketing and human resources. About 160,000 employees, or 55% of the bank's total head count, work in consumer-related businesses.

Some belt-tightening is underway. Bank of America dumped 63 unprofitable branches in the second quarter and intends to close 750 of its roughly 5,700 branches in the next few years. The bank's branches currently employ between 60,000 and 70,000 workers, said a person familiar with the situation.

The second phase of Project New BAC is expected to begin in October and focus on the bank's commercial units: investment banking, trading, wealth management and corporate banking.

To read BofA's memo to executives, click here.

This story originally appeared on WSJ.com.

Liz Rappaportand Robin Sidel contributed to this article.

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