(Reuters) – Bank of America Corp said it is cutting 30,000 jobs in the coming years as it looks to slash annual expenses by $5 billion, but investors were disappointed in the scant new detail the bank provided about its plans.
The bank’s chief executive,Brian Moynihan, said Bank of America is focusing for now on cutting costs in consumer banking and is taking steps like combining data centers to reach its target. Many of the job cuts will come from attrition and eliminating positions that are open now, the bank said.
Bank of America’s shares have lost more than half their value this year as mortgage litigation and a weakening economy threatened to sap the bank’s profits for years.
Media reports last week said the bank could cut as many as 40,000 jobs, and many investors had hoped the bank would announce a dramatic turnaround plan on Monday to show how it is addressing its difficulties.
The Moynihan speech “was pretty underwhelming. They need to address the bigger issues the bank faces,” said Jason Ware, equity analyst at Salt Lake City-basedAlbion Financial Group.
Moynihan was speaking at a Barclays Capital financial services conference in New York, and the bank announced the 30,000 layoff figure in a separate statement later Monday morning.
Bank of America is in the middle of a broad cost-cutting initiative known as New BAC after the company’s stock symbol. The first phase aims to reduce expenses by $5 billion by 2014.
The bank is targeting an expense-to-revenue ratio to 55 percent, compared with the first quarter when it was about 57 percent. Bank of America is cutting from roughly $73 billion in annual expenses, excluding interest expenses.
The next phase of cost cutting will focus on corporate and institutional businesses, like commercial lending.
Bank of America built itself through acquisitions over decades and, according to analysts, has not properly integrated systems or closed unnecessary branches. The bank had 5,700 branches nationwide and 287,000 employees as of June 30.
Bank of America has about 50 senior employees reviewing some 150,000 ideas for cutting costs, Moynihan said.
The bank’s talk of cost cuts came as U.S. President Barack Obama unveiled a plan to boost employment amid the struggling economy.
Bank of America shares were down 2 cents at $6.96 on Monday afternoon on the New York Stock Exchange.
Bank of America shares have lost nearly half their value this year amid rising fears the bank will need to sell more shares to boost capital levels.
By many estimates, the bank will need to raise about $50 billion in coming years to meet new global capital requirements, a level the bank says it can reach through earnings and asset sales.
Investors fear mortgage settlements could boost the bank’s capital requirements, and that any stock offering would further dilute shareholder equity. The bank’s share count has risen from 4 billion in 2007, before the financial crisis peaked, to more than 10 billion this year.
The bank’s share price decline was temporarily arrested in late August by a $5 billion investment from billionaire Warren Buffett, who purchased preferred stock and warrants to buy 700 million common shares over the next decade.
The initial news of the Buffett investment sent Bank of America shares soaring more than 20 percent, but they have since retreated to levels seen before the investment.
At the Barclays conference, Moynihan said the bank was not required by regulators to seek outside capital. He also said the Buffett deal was “absolutely the right thing” for the bank to do.
(Reporting by Joe Rauch and Dan Wilchins; Editing by Lisa Von Ahn, John Wallaceand Matthew Lewis)
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