Bank of America to Cut 35,000 Jobs by 2011
NEW YORK - Bank of America said yesterday taht it will eliminate 3,000 jobs over the next three years, as it faces a deteriorating economic environment and tries to absorb Merrill Lynch & Co. An announcement that came less than a week after the nation's second-largest bank reported a huge drop in earnings for the third quarter.
The cuts will affect less than 2% of the company's staff. Most of them will be from Bank of America's investment banking unit, the company said.
The Charlotte-based bank also said that it is launching a strategic review of its investment banking business.
The announcement of job cuts was hardly unexpected, considering the merger and the wave of job losses seen in the banking industry and in other sectors in recent months.
Bank of America said on Thursday that it planned to cut 30,000 to 35,000 positions — among the largest layoffs ever — over the next three years as it digests its acquisition of Merrill Lynch. That could amount to more than 11 percent of the combined firms’ global work force of 308,000.
Combining two firms as large as Bank of America and Merrill often involves eliminating duplicate jobs. Both have significant overlap in areas like research and investment banking.
But Bank of America, based in Charlotte, N.C., acknowledged that this round also reflected the dismal economy. The firm said the layoffs would cut across all of its businesses, and that a final number would be determined early next year.
Many of the jobs will be lost through attrition, Bank of America said, though a spokesman declined to comment on specifics of the plan, like which offices will be affected and which businesses will see job reductions.
Wall Street’s pain is unlikely to stop there. After years of rapid growth, built largely on the trading of risky securities like subprime mortgages, the financial services industry is in the throes of its sharpest contraction in modern times. As of last week, banks have cut 186,439 jobs since the onset of the financial crisis in July 2007, according to data from Bloomberg News. Bank of America has already laid off 11,150 employees, while Merrill has cut 5,720.
Bank of America, whose stock has fallen 64 percent this year, sealed its shotgun marriage to Merrill last week, creating a colossus of both corporate and consumer finance. But the firm, like its peers, has taken billions of dollars from the government to confront a recession that poses serious threats to many of its businesses.
Banks are already reeling from losses tied to credit card debt, auto loans and commercial real estate mortgages, and analysts worry that more consumers will struggle to stay current on the debts they incurred in more profitable times.
Jamie Dimon, the chief executive of JPMorgan Chase, said in an interview with CNBC that the global economy would be lucky if the current recession, which began last December, lasted just two more quarters.
He added that housing prices could fall another 20 percent, a situation that would force banks like JPMorgan and Bank of America to take even further write-downs on the mortgage assets they still hold on their books.
Shares in Bank of America fell 10.67 percent on Thursday, to $14.91, before the job cuts were announced. Shares in JPMorgan, which Mr. Dimon said experienced a “terrible” November and December, also fell more than 10 percent, leading financial stocks lower across the board.
Citigroup, the embattled financial giant, said last month that it was laying off 52,000 employees, the largest single wave of job cuts in nearly two decades. Even Goldman Sachs, which had dodged the worst of the pitfalls of the credit crisis, has begun laying off employees ahead of what many expect will be its first quarterly loss as a public company.
All the job cuts will be felt perhaps the most in the New York area, whose economy draws much of its city and state tax revenue from Wall Street.
New York City officials are bracing for thousands of additional layoffs. Earlier in the day, the New York City comptroller, William C. Thompson Jr., raised his estimates of Wall Street job losses over the next two years to 170,000. Together with an expected 50 percent drop in bonuses, to their lowest levels since 2002, the city’s tax revenue could fall by 4.3 percent in the 2009 fiscal year.
Last year, Wall Street paid out $33.2 billion in bonuses, a drop of 4.7 percent from the previous year.
“The toll taken by the financial industry makes this one of the grimmest economic periods for the city in many years,” Mr. Thompson said in a statement.