Job losses are looming at Charlotte's big banks
Big BofA cuts expected due to purchase of Merrill Lynch; one estimate expects 10%.
09/24/2008 12:00 AM
02/03/2015 11:02 AM
How many jobs will Bank of America Corp. cut in its planned purchase of Wall Street giant Merrill Lynch & Co.?
The Charlotte bank hasn't disclosed the amount, but analysts are expecting a big number if it's to achieve its goal of shaving $7 billion in annual expenses, or 10 percent of combined costs, by 2012. The cuts could resonate from Charlotte to Boston to New York.
At the high end, Aite Group analyst Alois Pirker said in a report last week that the bank may eliminate up to 27,000 jobs, roughly 10 percent of the combined work force of nearly 270,000 employees.
That estimate could be high because Chief Financial Officer Joe Price has said the bank can also wring savings from negotiating better deals with vendors and by combining office space, in addition to job cuts. Spokesman Scott Silvestri said the bank is very early in the merger process and “many decisions haven't been made.”
The deal, expected to close early next year, would combine the nation's biggest consumer bank with the biggest force of stockbrokers and a top-flight corporate and investment bank. The merged company would be the nation's biggest bank by assets.
Under chief executive Ken Lewis, the bank's largest round of merger cuts came in the 2004 FleetBoston Financial Corp. acquisition. The bank slashed about 12,500 positions, or about 7 percent of the combined company. It followed up with 4,500 additional reductions.
More recently, in this year's acquisition of mortgage lender Countrywide Financial Corp., the bank is eliminating about 7,500 jobs, about 3 percent of the combined work force.
In the Merrill Lynch deal, Bank of America will likely aim to keep most of Merrill's nearly 17,000 brokers. But Price has said the bank will target back-office positions, overlapping roles and support functions. Pirker, the analyst, said the bank will want to keep its own top-producing brokers, but “large parts of (its brokerage) unit will be redundant, and thus unnecessary.”
Bank of America's wealth and investment management division is based in Boston, and it has back-office operations spread across three major locations: Charlotte, New York and Lincoln, R.I. Merrill has back-office operations in Hopewell, N.J.
Another overlapping area will be corporate and investment banking, which includes Wall Street-style services such as stock and bond offerings and merger advice. Merrill Lynch is the better-known name in this arena, meaning Bank of America bankers in Charlotte and New York could be under fire.
Cost-cutting is key to financially successful bank deals because it allows the acquirer to boost profits as it tacks on new revenues. During a conference call last week, some analysts questioned whether Bank of America's $7 billion goal was overly optimistic, which drew a sharp response from Lewis.
“This isn't our first time,” he said. “More often than not, if not always, when we say we're going to get ‘x' amount of expense saves, we get them.”
Charlotte's other big bank, Wachovia Corp., is also in the process of cutting jobs, particularly in its mortgage unit. It's eliminating nearly 7,000 positions, or about 6 percent of its workforce.
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