Bank of America (NYSE: BAC), the nation’s second largest bank, plans to cut 16,000 by the end of this year, according to a report published in The Wall Street Journal. The cuts come at a precarious time as the nation continues to struggle from unemployment, with a weak labor market on the minds of millions of Americans heading into an election season.
If carried out, the Charlotte, North Carolina based behemoth plan would end its run as the largest banking employer in the U.S. and could reduce its workforce to around 260,000, below rivals Wells Fargo (NYSE: WFC) and JPMorgan Chase (NYSE: JPM) and its smallest headcount since 2008. The drop in headcount is part of a larger overall trend for the firm, still struggling to recover from the financial crisis.
In the face of declining revenue, the cuts would help accelerate the cost cutting plans outlined as the company’s Project New BAC. Project New BAC is reportedly aiming to slash 30,000 jobs by the end of next year, saving $5 billion in annual costs. The project is currently a bit behind schedule through the second quarter of this year, reporting savings of an annual $970 million, short of a $1 billion goal.
The company plans to shape operations in taking on less risk while increasing revenue from prior customers, detailed in a document given to top management according to The Wall Street Journal. Bank of America aims to reduce both local branches and its mortgage operation while refocusing on its investment banking business in Merrill Lynch, the document said.
CEO Brian Moynihan is committed to taking the bank in a new direction. Moynihan has largely dismissed Bank of America’s previous strategies for expansion pursued by his predecessors, instead aiming to turn the bank into a more efficient and lean machine capable of competing in the new environment. Moynihan has reduced total assets since his rise by nearly 7%, with share prices down 37% since he took over. The changes are yet to show any significant dividends, as the firm’s profits and share prices continue to lag behind the competition. Nonetheless, it does seem to be the most appropriate strategy for the firm at this time, to right size the firm for the future financial industry.
