Banking

Moynihan: More cost-cutting, job reductions expected at BofA

Charlotte-based Bank of America reported its third-quarter financial results on Wednesday, becoming the second of the biggest U.S. banks to do so. New York’s JPMorgan Chase & Co. reported its third-quarter results on Tuesday. San Francisco’s Wells Fargo will also report on Wednesday.
Charlotte-based Bank of America reported its third-quarter financial results on Wednesday, becoming the second of the biggest U.S. banks to do so. New York’s JPMorgan Chase & Co. reported its third-quarter results on Tuesday. San Francisco’s Wells Fargo will also report on Wednesday. AP

Bank of America swung to a profit in the third quarter, but its executives also said Wednesday to expect more cost-cutting and job reductions from the Charlotte-based lender.

In an interview with Bloomberg Television, CEO Brian Moynihan said he expects the bank’s employee count to keep falling. Some will come from attrition, he said.

“The headcount will come down because we’re 60 percent people costs,” he said. “There’s not enough other costs to save a lot of money.”

Such comments illustrate that reducing expenses continues to be a focus for Moynihan, now in his sixth year as CEO.

In particular, the bank is pushing to further slash expenses in its unit that works with homeowners who have fallen behind on mortgages. Moynihan has already removed billions of costs from that unit, which posted a loss in the third quarter.

On Wednesday, Bank of America reported making $4.5 billion in profit in the third quarter, rebounding from a $232 million loss in the same period last year. Last year’s loss came amid much larger legal costs as the lender reached a $16.65 billion mortgage-related settlement with the Justice Department.

Moynihan touted progress reflected in Wednesday’s numbers, such as growth in deposits, calling the third quarter “solid.” But he also cited low interest rates and a sluggish economic recovery as factors in a “tough revenue environment.”

Revenue fell about 2.5 percent to $20.7 billion, a drop the second-largest U.S. bank by assets blamed in part on adjustments it occasionally makes to account for changes in long-term interest rates.

At the end of the third quarter, the bank had 215,193 employees worldwide, down by more than 14,300 from a year ago. Its branch count dropped to 4,741, a decline of more than 200. Since Moynihan took over in 2010, Bank of America has shed more than 68,800 jobs and 1,200 branches.

The bank has said its Charlotte employment has held steady at about 15,000 even as its overall employment has shrunk in recent years.

Employee count has been falling even as Bank of America adds “client-facing” personnel, Moynihan said, such as mortgage lenders and small-business bankers.

In other positives from the quarter, Bank of America grew the number of new consumer credit cards it issued and the value in home loans it originated. Its earnings of 37 cents per share exceeded the 33 cents expected by analysts.

The bank’s legal costs plummeted to $231 million from $6 billion in the same quarter last year.

But trading revenue, excluding an accounting adjustment, helped offset such improvements.

Trading revenue fell about 3.8 percent, which Bank of America blamed on market volatility that occurred late this past summer. On Tuesday, JPMorgan Chase & Co. posted a roughly 6 percent decline in overall revenue, partly from trading declines.

Moynihan had warned last month that the bank expected lower third-quarter trading revenue from weakened activity. As it’s dealt with that slowdown, Bank of America has made job cuts worldwide across its trading and investment-banking units, including fewer than 10 employees in the Charlotte area.

Erik Oja, an analyst at S&P Capital IQ, said investors are looking for Bank of America to grow its revenue this year by nearly 2 percent.

“I think that’s still in the realm of possibility,” he said. “It’ll be a challenge.”

That would have been easier had the Federal Reserve decided last month to raise interest rates, he said.

Oja said a key question among Bank of America’s shareholders remains when the bank will pay more than a common dividend of 5 cents a quarter.

“That would make the stock a lot more attractive,” he said.

Before the crisis, the bank paid 64 cents a quarter.

Bank of America shares rose less than 1 percent Monday to $15.64, on a day when major stock indices fell.

For the year, the stock is down about 13 percent. The KBW Bank Index, which tracks share performance of 24 large U.S. lenders, is down about 7 percent.

Deon Roberts: 704-358-5248, @DeonERoberts

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