Make us your home page
Instagram

Bank of America is cutting 30,000 from work force

NEW YORK — Bank of America is slashing 30,000 jobs as part of an effort to reverse a crisis of confidence among investors. It's the largest single job reduction by a U.S. company this year.

What chief executive Brian Moynihan is trying to do is nothing less than save the nation's largest bank. Investors have cut the bank's market value by half this year. The bank is facing huge liabilities over soured mortgage investments and concerns over whether it has enough capital to withstand more financial shocks.

The cuts, which affect Bank of America's consumer businesses, represent 10 percent of the Charlotte, N.C., bank's work force. The bank said it hopes the cuts and other measures will result in $5 billion in annual savings by 2014. The bank has already cut 6,000 jobs this year. The bank also said it would look for cost savings at its other businesses in a six-month review that will begin next month.

"It's as if someone has hit the panic button," said Bert Ely, president of banking consultant Ely & Co.

Moynihan has been taking other steps to shore up the bank's standing. Last week, he shook up the bank's top management ranks and has been selling parts of the company to raise cash. Last month, Warren Buffett's Berkshire Hathaway Inc. invested $5 billion in the company.

Moynihan has struggled to calm investors ever since he took the top job in January 2010. He is reversing the empire-building strategy of his predecessor, Ken Lewis, who stepped down amid controversy over the purchase of Merrill Lynch during the financial crisis. Lewis also engineered the ill-fated acquisition of Countrywide Financial Corp., then the country's largest mortgage lender, which has led to heavy financial losses, lawsuits and regulatory probes.

Moynihan is now taking a knife to the company, hoping to shrink it to a more manageable size, even if it means losing the bragging rights of being the nation's largest bank. "We don't have to be the biggest company out there," said Moynihan.

Bank of America's stock has lost 48 percent this year, largely because of problems related to poorly written mortgages at Countrywide. From January to June, the bank paid $12.7 billion to settle claims from investors that it sold them securities backed by faulty mortgages.

Some investors and analysts worry that the job cuts will lead to poor customer service and the bank will lose market share to rivals at a time when there are signs that the economy is slowing down. They also wonder if the job cuts are enough to produce the profits the bank needs to overcome the spiraling costs from its mortgage business.

"There is a fair amount of skepticism on Wall Street, and (Moynihan) is doing as much as he can do in the face of a worsening economy," said Nancy Bush, an analyst and contributing editor at SNL Financial, a research firm.

The bank's stock was down for most of the afternoon, but rose along with the overall market to close up 7 cents, or 1 percent, at $7.05.

Bank of America is seen as one of the most bloated banks in the industry. The payroll cuts will bring its work force in line with some of its key rivals. JPMorgan Chase & Co. had 250,000 workers at the end of the second quarter.

The cuts are the largest by a U.S. employer this year, according to the outplacement consulting firm Challenger, Gray & Christmas Inc.

Merck & Co. said this year it would cut 13,000 jobs.

Bank of America is cutting 30,000 from work force 09/12/11 [Last modified: Tuesday, September 13, 2011 9:51am]
Photo reprints | Article reprints

© 2017 Tampa Bay Times

    

Join the discussion: Click to view comments, add yours

Loading...
  1. Minority business accelerator launch by Tampa chamber to aid black, Hispanic businesses

    Business

    A "minority business accelerator" program was launched Thursday by the Greater Tampa Chamber of Commerce geared toward helping black and Hispanic business owners identify and overcome barriers to grow their companies. The accelerator, known as MBA, will provide participants with business tools to cultivate opportunities …

    Bemetra Simmons is a senior private banker at Wells Fargo, The Private Bank. She is also chair of the new minority business accelerator program for the Greater Tampa Chamber of Commerce. [Photo, LinkedIn]
  2. Terrier Tri brings unique triathlon training to South Tampa

    Business

    Over a decade ago, Robert Pennino traded late nights in the music studio for early mornings in the Terrier Tri cycle studio.

    Terrier Tri, a cycling studio in South Tampa celebrates a grand opening on June 27. Photo courtesy of Tess Hipp.
  3. New bistro hopes to serve as 'adult Chuck E. Cheese'

    Business

    YBOR CITY — Inside Cheezy's Bistro and Speakeasy, a new restaurant opening in Ybor City, customers will find a mix of family recipes, games and secrecy.

    Cheezy's Bistro and Speakeasy readies to open in Ybor City. Photo courtesy of Cheezy's Bistro and Speakeasy.
  4. Ramadan having an economic impact on local charities, businesses

    Economic Development

    TAMPA — Dodging the rain, a few families and customers gathered inside Petra Restaurant on Busch Boulevard. Around 8:30 p.m., the adham (or call to prayer) music begins, signaling Iftar, the end of the daily fast. Customers grabbed a plate to dig into the feast.

    Baha Abdullah, 35, the owner of the Sultan Market makes kataif, a common dessert that is eaten during the month long celebration of Ramadan in Tampa. [OCTAVIO JONES   |   Times]
  5. Senate GOP leaders face tough job in selling health-care bill to their members

    Health

    WASHINGTON — Senate Republican leaders on Thursday moved swiftly to begin selling their health-care measure to substantially rewrite the Affordable Care Act to their wary members as they seek to garner enough support to pass the bill in an expected vote next week.

    U.S. Senate Republicans on Thursday unveiled a proposal to repeal and replace the Affordable Care Act. The bill's chief author, Senate Majority Leader Mitch McConnell, has said "Obamacare is collapsing around us, and the American people are desperately searching for relief." [AP]