Bank of Amer­ica set to cut 3,500 jobs

The Pak Banker - - FRONT PAGE -

Bank of Amer­ica Corp., the na­tion's largest bank, said that it plans to cut 3,500 jobs by the end of Septem­ber. The cuts amount to a lit­tle more than 1 per­cent of the bank's work­force of roughly 288,000. But they fol­low a string of other lay­offs, in­clud­ing 2,500 al­ready an­nounced this year.

A bank spokesman de­clined to say if the cuts would be con­cen­trated in a par­tic­u­lar part of the coun­try, but said they would be spread across most of the busi­ness units."The com­pany regularly as­sesses the ef­fi­ciency of its busi­nesses and at times is go­ing to make ad­just­ments to meet the op­por­tu­ni­ties that are in the mar­ket­place," said spokesman Scott Sil­vestri.

The bank has pre­vi­ously cut jobs in the mort­gage lend­ing and in­vest­ment bank­ing, for ex­am­ple, af­ter de­mand for those ser­vices slowed.Sil­vestri said the lay­offs were not part of "New BAC," a cost-cut­ting pro­gram an­nounced in May.

Af­ter this round of lay­offs, the bank should have about 284,000 em­ploy­ees. Its ros­ter peaked in early 2009, right af­ter it ab­sorbed in­vest­ment bank Mer­rill Lynch and mort­gage len­der Coun­try­wide Fi­nan­cial, at about 302,000.The en­tire bank­ing in­dus­try is shrink­ing, as new reg­u­la­tions and the fall­out of the fi­nan­cial cri­sis force it to be­come smaller, sim­pler and less prof­itable.

Many of the com­pli­cated in­vest­ment ve­hi­cles that fu­eled the in­dus­try be­fore 2008 are gone, af­ter be­ing blamed for caus­ing the fi­nan­cial cri­sis.U.S. banks em­ploy about 2.09 mil­lion peo­ple, down from 2.21 mil­lion peo­ple in early 2008, ac­cord­ing to data com­piled by the Fed­eral De­posit In­sur­ance Corp.

The fi­nance and in­sur­ance in­dus­try made up about 8 per­cent of the coun­try's gross do­mes­tic prod­uct last year, ac­cord­ing to the fed­eral Bureau of Eco­nomic Anal­y­sis. That's in line with where it was in 2007, be­fore the fi­nan­cial cri­sis took hold. Like other in­dus­tries, bank­ing has al­ways ebbed and flowed with the mar­kets. It started lay­ing off in­vest­ment bankers as the econ­omy be­gan to sput­ter in 2007. It laid off work­ers again in 2008 and 2009, as the fi­nan­cial cri­sis sent many banks into the red and forced them to take gov­ern­ment bailouts.

But 2010 pro­vided some re­lief, with shares bounc­ing back and banks mak­ing prof­its, and banks even hired back some work­ers.But now banks are cut­ting jobs again. Bank of New York Mel­lon Corp., Gold­man Sachs Group Inc. and State Street Corp., among oth­ers, have re­cently an­nounced lay­offs.

This latest round is dif­fer­ent be­cause it's com­ing at a time when many banks are ac­tu­ally post­ing im­proved prof­its. An­a­lysts say the latest cuts point to per­ma­nent struc­tural changes, not tem­po­rary mar­ket prob­lems.The KBW Bank In­dex has fallen 22 per­cent this month, com­pared to a 12 per­cent fall in the S&P 500. Bank of Amer­ica shares have fallen 28 per­cent.

In­vestors are wor­ried about banks' ex­po­sure to con­tin­ued prob­lems over soured mort­gages and mort­gage-backed se­cu­ri­ties. Though the banks' cap­i­tal cush­ions are higher and many are turn­ing prof­its, it's not known how much they could have to pay to in­vestors who claim they were mis­led into buy­ing the se­cu­ri­ties.

Bank of Amer­ica is es­pe­cially vul­ner­a­ble, partly be­cause of its fast ex­pan­sion dur­ing the height of the fi­nan­cial cri­sis: It's still clean­ing up the ex­otic mort­gages of Coun­try­wide, a Cal­i­for­nia-based len­der it bought in the sum­mer of 2008. The move pro­pelled the Char­lotte bank into the coun­try's big­gest mort­gage len­der, but it has also brought it law­suits, reg­u­la­tory probes and quar­terly losses.

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