Bank of America Starts Slashing Jobs to Save Billions in Costs
Bank of America (NYSE:BAC) plans to cut 3,500 jobs by the end of September, according to an internal memo, and could cut as many as 10,000 jobs as part of a wider review, according to an insider with knowledge of the issue. At the start of 2011, Bank of America had around 280,000 employees.
The plan, which Bank of America (NYSE:BAC) has yet to publicly comment upon, is likely a cost-cutting measure, as Bank of America faces billions of dollars in liability for mortgage securities and higher capital requirements under both Dodd-Frank and Basel III. And still the bank may have to raise money to cover its new costs by offering new shares. In July, Bank of America reported a quarterly loss of $8.8 billion. The bank’s shares are already worth less than half of what they were at the beginning of the year, closing Tuesday at $7.01.
Bank of America announced Monday that it planned to sell for $8.6 billion its Canadian credit card portfolio to TD Bank Group (NYSE:TD) in order to raise capital. The bank also plans to divest itself of its U.K. and Ireland credit card businesses. Bank of America has lost over $22 billion in its consumer mortgage division in the last year, and agreed in June to pay $8.5 billion to mortgage securities investors, but is still facing numerous lawsuits challenging that settlement and addressing other mortgage issues.
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Bank of America hasn’t been the only bank facing higher capital requirements, soured mortgage-backed securities lawsuits, declining share prices, and thus the need to find cut costs and sell off assets. Global banks have announced roughly 50,000 planned job cuts, beginning now and continuing in the coming years, with HSBC (NYSE:HBC) and Lloyds Banking Group (NYSE:LYG) so far having announced the most cuts. Bank of New York Mellon (NYSE:BK) announced just last week that it would cut about 1,500 jobs, roughly 3% of its workforce, in order to stem rising expenses.