Bank of America to Cut $5 Billion Annually as Part of ‘Project New BAC’

Bank of America (NYSE:BAC) expects to cut $5 billion in costs annually by 2013 as part of CEO Brian Moynihan’s plan to bolster profit and the company’s stock. The first phase of the overhaul, dubbed “Project New BAC”, will begin next month with an evaluation of commercial and investment banking scheduled for completion in April 2012.

In a speech this morning, Moynihan said “We don’t have to be the biggest company out there, we have to be the best…We can get out of things we don’t need to do, make the company leaner, more straightforward, more driven.” He did not address the issue of how many jobs would be affected. In an August 18 memo, Moynihan disclosed plans to cut 3,500 jobs by the end of September.

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Bank of America already slipped to number two against Wells Fargo (NYSE:WFC) in terms of home loans earlier this year, and ceded its title as the top bank in terms of deposits to JPMorgan (NYSE:JPM) at midyear, but remained the nation’s largest employer among U.S. lenders as of June 30, with roughly 288,000 employees. However, reports that have the Moynihan considering cutting as many as 40,000 jobs could have the bank losing that title as well. Citigroup (NYSE:C) has over 260,000 employees and JPMorgan has about 250,000.

The first phase of Project New BAC will focus on consumer banking, credit cards, home loans, and technology, aiming to cut 18% from the company’s $27 billion in consumer-related expenses. “When you take Phase 1, and combine with Phase 2, we feel comfortable we’ll get back to the 55 percent efficiency ratio we talked about in March,” said Moynihan.

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Since becoming CEO in January 2010, Moynihan has recorded an $8.8 billion quarterly loss, committed $30 billion to clean up faulty mortgages, and sold at least $40 billion of the bank’s assets and preferred shares, all in an attempt to bolster capital and investor confidence. Losses, legal costs, and writedowns tied to the bank’s 2008 takeover of sub-prime lender Countrywide Financial have put the bank’s profit under pressure. Meanwhile, revenue has been shrinking as the U.S. economy continues to stagnate. Moynihan has said that, as one of the biggest consumer lenders, Bank of America’s fortunes are tied closely to home prices and the national jobless rate.

Bank of America’s stock was down 48% this year as of Friday, making it the Dow’s worst performer.