Bank of America (NYSE: BAC) Plans 16,000 Layoffs Amidst ‘Project New BAC’
Bank of America (NYSE: BAC) isn’t popular. The firm is not darlings of Wall Street, nor do they have a bevy of fans on Main Street these days. The firm has been a lightning rod for the past four years, evidence of investing gone awry and a stereotype of many of the negatives of the financial system. Though the firm has struggled, and continues to struggle mightily against tough headwinds, the firm also has a clear plan and direction that might finally start paying off soon. Of course, it may get worse before it gets better.
Recently, the Charlotte based banking behemoth announced a series of job layoffs expected to occur before the end of year. Numerous reports peg that number at 16,000. The cuts come as part of a broader initiative underway at the bank, a project termed “Project New BAC”, which seeks to reinvent the bank and return it’s profitability largely though cost cutting. With revenues declining, the profits and stock price have been battered, leaving serious cost cutting as the only current viable solution to returning at least a fragment of the firm’s once prosperous glory.
Project New BAC, named for the bank’s ticker symbol, was designed to make the company take less risk, generate more revenue from its existing customers, and become a more powerful player in international investment banking, using the operation inherited from Merrill Lynch. To further lower costs, the bank will close 200 branches and shrink its mortgage operations. By year’s end, Bank of America aims to decrease its workforce from the 290,000 employees the bank had when the project began, to 260,000. The cuts will be primarily in the consumer banking division, a loss leader, but symbolically important for a firm that touts its place in communities.
Bank of America’s efforts to become a smaller and more efficient business come as Chief Executive Brian Moynihan tries to convince investors of the bank’s profitability in light of new regulations, an uneven economy, and shaky markets. Moynihan has pursued a different strategy than his predecessors since becoming CEO in 2010, aiming to shrink, rather than grow the bank. The acquisitions Moynihan inherited have grossly destabilized a once stable banking business model. Adding in the former Countrwide business and Merrill Lynch never quite fit amongst the changing regulatory landscape, but the firm seems at least committed to the idea of making it work for now. More unstable quarters might force the bank to finally admit that the landscape has changed and take more drastic measures.