The 30,000 Bank of America Corp. employees about to lose their jobs face bleak prospects in a market that’s contracted 9 percent for financial-services workers in the past five years and as smaller lenders cut back.
Bank of America, the biggest US bank, said today it aims to eliminate $5 billion in annual costs by the end of 2013 as Chief Executive Officer Brian Moynihan implements a plan to restore profitability. The job cuts are expected to come “over the next few years,” the Charlotte, North Carolina-based bank said in a statement.
Employment in the financial-services industry fell to 7.61 million workers in August from a peak of 8.35 million in December 2006, according to the Bureau of Labor Statistics. Regional lenders probably can’t pick up many of the new round of castoffs, as smaller banks trim expenses to counter slowing revenue growth, said Kevin Fitzsimmons, an analyst for New York- based Sandler O’Neill & Partners LP.
“It’s a tough time,” Fitzsimmons said. “Everyone is scrutinizing their expense base. If that trend is going on across the industry, I wouldn’t jump to the conclusion that there’s a home for all of these folks.”
The first phase of Bank of America’s overhaul, named Project New BAC after the company’s stock ticker, focuses on consumer banking, credit cards, home loans and technology, Moynihan said today at an investor conference in New York. The effort will slash about 18 percent from the company’s $27 billion in consumer-related expenses, he said.
Consumer banking
The earliest cuts will target consumer banking and support staff such as human resources, according to the bank.
A prolonged low interest-rate environment and slow economic growth are squeezing margins while loan demand slows, forcing branch closings and job cuts at both the biggest banks and among regional lenders.
Regions Financial Corp., based in Birmingham, Alabama, plans to consolidate about 40 branches later this year to focus on “productivity and efficiency initiatives,” CEO Grayson Hall said in July. Atlanta-based SunTrust Banks Inc. is targeting $300 million in expense cuts through 2013, partly by providing some services with “fewer people in the future,” CEO William Rogers said on a conference call that month.
“There’s probably not a long list banks you can think of to say, ‘They’re hiring,’” Fitzsimmons said. “It’s very selective. Otherwise, some of those people might have some time to wait until things get better.”
Wells Fargo
As of June 30, Bank of America still ranked as the largest employer among US lenders with about 288,000 people. San Francisco-based Wells Fargo & Co., which has the biggest branch network, and New York-based Citigroup Inc. are next largest, with more than 260,000 employees. JPMorgan Chase & Co., the most profitable US bank, had about 250,000 workers.
Citigroup CEO Vikram Pandit has slashed more than 100,000 workers since December 2007 through a combination of layoffs and sales of distressed investments. Pandit, 54, has sold more than $300 billion of troubled assets, including unwanted finance firms, auto loans and private-equity stakes. Still, he aims to more than double the bank’s staff in China to 12,000.
Bank of America’s branch employees could provide hiring opportunities for profitable banks with adequate capital levels, Fitzsimmons said. BB&T Corp., based in Winston-Salem, North Carolina, may look at “selective” hiring opportunities following the layoffs, he said. The lender remained profitable throughout the financial crisis, and its Tier 1 common capital ratio widened to 12.3 percent in the second quarter from 11.7 percent in the year-earlier period.
Taking applications
“BB&T looks for talented, independent and highly motivated individuals,” said Merrie Tolbert, a spokeswoman for the company. The bank accepts applications from those who might be “impacted by change,” she said.
BB&T employed about 31,400 people at the end of 2010, down from 32,400 in 2009.
Even some of the nation’s “healthy” banks, such as Wells Fargo and U.S. Bancorp, are cutting back, said Andrew Marquardt, an analyst at New York-based Evercore Partners Inc.
U.S. Bancorp, based in Minneapolis, has a hiring freeze in place for the second half of the year, Marquardt wrote in a Sept. 8 note. Tom Joyce, a spokesman for U.S. Bancorp, didn’t immediately respond to calls seeking comment.
Wells Fargo is in the middle of its Project Compass, which aims to cut expenses by $1.5 billion a quarter by the end of next year.
More conservative
“For a consumer, it’s really that the uncertainty is increasing, and because of that uncertainty, they want to be more conservative,” Marquardt said in a phone interview. “We need to see jobs creation, we need to see economic growth and confidence come back.”
Moynihan has sought to bolster capital at Bank of America and confidence among investors after a 54 percent slide in the stock since he became CEO in January 2010 through last week. His tenure includes posting a record $8.8 billion quarterly loss, committing $30 billion to clean up faulty mortgages and selling about $40 billion of assets and preferred shares.
In an Aug. 18 memo, Moynihan disclosed 3,500 job cuts that will affect operations across the firm, including as much as 5 percent of the investment-banking unit, or about 600 people, two people with knowledge of the plans said last month. Employees cut from the investment-banking unit could also have trouble finding new work, said Richard Lipstein, a managing director for Boyden Global Executive Search.
“Most people will then try to get a job exactly like the one that they just left,” Lipstein said. “In a business that is shrinking, it won’t necessarily be possible to land such a job. The smart job-seeking advice, therefore, would be to spread your net as wide as possible from the get-go.”
--With assistance from Hugh Son and Donal Griffin in New York. Editors: Steve Dickson, David Scheer
