Bank of America on Monday said it eliminated more than 2,600 jobs in the second quarter, while announcing new cost-cutting targets that could mean additional reductions in staff.
In reporting its latest quarterly financial results, the Charlotte-based bank said it trimmed 2,667 positions during the three-month period – its biggest quarter-to-quarter drop in a year. After the cuts, the bank has 210,516 employees, down by more than 6,100 from a year ago.
The latest reductions add to the tens of thousands of positions Brian Moynihan has cut through layoffs, attrition and business unit sales since becoming CEO in 2010. His aim has been to streamline a company that grew unwieldy after decades of acquisitions – and to lower expenses at a time when banks are struggling to boost revenues because of low interest rates.
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Chief Financial Officer Paul Donofrio, speaking on a conference call with analysts, said the bank’s rate of eliminating positions has been slowing. Increasingly, he said, reductions have included highly paid managerial associates.
The bank’s employee base “continues to grind lower,” even as it has increased client-facing staff such as sales personnel, Donofrio said. Some of the job cuts in the second quarter affected Charlotte, where the bank says it employs about 15,000.
The shrinking workforce comes as Bank of America and other banks cope with interest rates that have barely budged since the Federal Reserve pushed down a key rate to help stimulate the economy during the last recession. Those low rates have been good for borrowers but bad for banks’ profitability.
In its earnings report Monday, Bank of America said its second-quarter net income fell about 18 percent to $4.2 billion. The results, however, beat analyst expectations, and the bank’s shares closed up more than 3 percent Monday to $14.11. Other large banks that have reported second-quarter results, including Wells Fargo, also saw profits decline.
Moynihan said Monday that the bank is focused on what it can control in an era of low rates.
“We continue to focus on managing our risks, our costs and our delivery of quality products and customer service,” said Moynihan, who called it “another quarter of solid progress.”
The bank expanded loans and deposits in the quarter, helping boost its core net interest income from a year ago. Two accounting adjustments totaling more than $1 billion lowered earnings by 6 cents per share.
Erik Oja, an analyst with S&P Global Market Intelligence, in a research note Monday said he sees Bank of America slowly and steadily improving its return on equity, a profitability metric, and capital. But he also cut the bank’s 2016 earnings-per-share estimate from $1.40 to $1.26, citing low interest rates.
Moynihan also remains under pressure to improve the bank’s efficiency ratio, a closely watched measure of how much it costs to generate one dollar of revenue. The bank is seeking to lower the ratio to 60 percent. In the second quarter, the ratio on an adjusted basis was 62 percent, down from about 65 percent a year ago.
On Monday, Bank of America unveiled plans to reduce its annual noninterest expenses to about $53 billion by the end of 2018 – from about $56.3 billion over the past 12 months. By comparison, the bank’s annualized expenses had been as high as about $70 billion in 2011, when Moynihan launched his now-completed Project New BAC cost-cutting program.
On Monday, Moynihan said a decrease in employees has been one key driver of falling expenses.
“It’s a constant reduction in personnel through hard work and automation,” he said. A smaller workforce has resulted in lower occupancy and telecommunications costs, he said.
As the bank has cut costs, it has also been reinvesting in new technologies, executives said, such as mobile banking capabilities.
Going forward, executives said the bank plans to further chop costs through its ongoing Simplify and Improve initiative, designed to streamline work processes.
Other banks cutting, too
Since 2010, Bank of America’s total employment has fallen by more than 70,000, or about 26 percent. Its employment now stands at about 3,500 more than in June 2008 – shortly before it added tens of thousands of workers by buying Countrywide Financial that year and Merrill Lynch in 2009.
A large number of those cuts have come in a unit Bank of America launched in 2011 to deal with large numbers of soured mortgages, many of which it inherited from its 2008 purchase of home loan giant Countrywide. The bank has reduced employment in the unit, as it has lowered the number of troubled mortgages on its books since the recession. Moynihan said Monday that about 900 of the second-quarter job cuts were in the unit, where the bank plans to further reduce costs.
Banks everywhere have been axing jobs since the recession to cope with a variety of market changes, from fluctuations in mortgage rates to reduced need for branches.
San Francisco-based Wells Fargo shed 700 positions in the second quarter. New York-based Citigroup eliminated 5,000.