* Joins parade of banks slashing jobs amid weak economy
* Capital needs also spurs asset sales at biggest US bank
* Traders bet against BofA with hefty put option volume
(Adds analyst comments, rewrites throughout)
By Joe Rauch and Saeed Azhar
CHARLOTTE, N.C./SINGAPORE, Aug 19 Bank of
America Corp (BAC.N) plans to cut 3,500 jobs in the next few
weeks as CEO Brian Moynihan tries to come to grips with the
bank's $1 trillion pile of problem home mortgages.
The job cuts, which the Wall Street Journal said could rise
to 10,000 in coming months, follows a series of quarterly
losses over the past two years by the biggest U.S. bank,
including a record loss of $8.8 billion in the latest quarter.
Moynihan announced the 3,500 cuts in a memo to staff on
Investors have pummeled the banks' stock in recent weeks on
fears it may need to raise outside capital to absorb losses.
Moynihan has remained adamant that a share offering is
unnecessary, and the bank can raise enough capital through
improved quarterly profits.
Yet with low interest rates and a sluggish U.S. economy
providing few opportunities for revenue growth, analysts said
the bank is forced to look at expense cuts.
"There's very few things they can control in this
environment, and this lever is one of them," said Jefferson
Harralson, who follows U.S. bank stocks at Keefe, Bruyette &
The job cuts are expected to be supplemented by additional
cost-cutting in future quarters as part of a previously
announced expense control program known as New BAC -- a
reference to the bank's stock ticker.
"The third-quarter reductions in force are not part of the
New BAC Project, through which employees and managers are
working to transform policies, practices and organizations to
better align to the company's customer-driven strategy," the
memo obtained by Reuters said.
BofA names new boss for bad mortgages [ID:nN1E77H13A]
BofA to exit Canada, Europe credit cards [ID:nN1E77E06U]
BofA reports worst ever loss [ID:nN1E76H0D0]
FACTBOX-Recent job cuts at major banks [ID:nL6E7J11KC]
Options trades on BoFA, Citi [ID:nN1E77H1UI]
Bank of America is part of a growing list of large banks
Global banks have announced close to 50,000 job cuts in
recent months, with some expected to extend into 2012. Bank of
New York Mellon Corp (BK.N) last week said it plans to cut
about 1,500 jobs, or 3 percent of its workforce.
So far this year, Bank of America shares are down 37
percent, as of mid-morning Friday.
Bank executives haven't announced specific areas of
cutbacks, but one person familiar with the situation said at
least 10,000 jobs are likely to be eliminated as part of a
wider review, according to a report in The Wall Street
Analysts said the bank is most likely to cut from its
branches and other retail banking businesses, which now
generate little profit for the bank in a weak economy.
More profitable areas of the bank -- like corporate and
investment banking, or wealth management -- will see fewer
cuts, analysts said.
With little new loan growth and customers hoarding cash,
U.S. banks' demand for deposits has declined from the heights
of the housing boom when new deposits were necessary to fuel
exploding loan growth.
Bank of America has gradually cut back its branch network
from more than 6,000 branches to roughly 5,800.
"The long-term future of the industry is not in
bricks-and-mortar branches," said Tony Plath, banking professor
at the University of North Carolina at Charlotte. "That's the
business that's now at most risk of getting cut."
Bank of America had around 280,000 employees at the start
of 2011, according to its annual report, meaning the announced
layoffs will apply to just about 1 percent of the company's
During a conference call with investors last week, Moynihan
said the bank could cut as much as $1.5 billion in quarterly
expenses. He referred specifically to shrinking its mortgage
portfolio as well as New BAC.
Bank of America accumulated total noninterest expenses of
$43 billion in the first six months of 2011, up 23 percent from
the comparable 2010 period. Compensation accounted for 44
percent of the expenses this year.
Moynihan has repeatedly denied plans to issue more shares
that would be dilutive to current shareholders, after the
bank's share count rose from 4 billion before the 2008
financial crisis to roughly 10 billion now.
Moynihan has said that the company will continue to shed
nonessential assets. On Monday it announced plans to sell its
$8.6 billion Canadian credit card portfolio to TD Bank Group
(TD.TO) and said it is considering exiting its United Kingdom
and Ireland card businesses.
It has not yet decided whether to sell or wind down the UK
and Irish operations, a company spokesman said at the time.
In an attempt to move forward on remedying its mortgage
problems, the company on Thursday appointed an executive from
its Merrill Lynch investment banking unit to oversee its
troubled home loan portfolio. The consumer mortgage division of
the bank has contributed to more than $22 billion of losses in
the last four quarters.
The bank's second-quarter loss of $8.8 billion, its worst
ever, included plans to pay $8.5 billion to settle a lawsuit
from mortgage securities investors. However, other investors
are contesting the settlement.
Bank stocks worldwide have been under pressure in recent
days. Option traders on Thursday zeroed in on European bank
stocks as well as on Bank of America and Citigroup (C.N). More
than 71,000 November $4 puts on BofA changed hands, giving
holders the right to sell the stock at a little more than half
its current price.
Shares of the bank, which traded above $15 in January, were
down 3 cents at $6.98 in midday trading Friday on the New York
(Additional reporting by Soham Chatterjee in Bangalore;
Writing by Vinu Pilakkott and Jed Horowitz; Editing by Lincoln
Feast, Dave Zimmerman)