Bank of America said Thursday that it will likely eliminate 30,000 to 35,000 jobs over the next three years, in relation to its pending acquisition of Merrill Lynch & Co. and the faltering economy.
The bank said that job losses will come from both Merrill and Bank of America and affect all lines of business. Spokesman Scott Silvestri declined to comment on how many jobs might be lost in Charlotte, where Bank of America employs 15,000 – or about 5 percent of the combined company's work force. The bank said that a final number on the job cuts will not be determined until 2009.
The cuts had been expected in Charlotte, the country's second-biggest banktown by assets. Workers at Bank of America and rival Wachovia, which has 20,000 local employees, have been worrying over losing their jobs as the financial industry has been turned upside down in recent months.
Bank of America is relatively healthy compared to many of its peers, so its massive job cuts are another signal of how deep the current financial crisis is. Last month, New York-based Citigroup announced it would lay off 50,000 workers across the globe.
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Bank of America has 247,000 employees, and Merrill has 61,000, so the layoffs announced Thursday would amount to about 10 percent of the combined company's work force. Bank of America had already said that it expected to trim $7 billion, or 10 percent of the combined company's annual expenses, from the balance sheet, so some analysts had already said that 30,000 was a reasonable estimate.
The layoffs announced Thursday will mostly start in the first quarter of 2009, Silvestri said. However, he confirmed that the bank has already started “a few” layoffs in December related to business conditions.
The bank said that as many reductions as possible will be made through attrition, and that severance and other benefits will be provided for workers who are laid off and are not offered other jobs.
“The reductions are designed to eliminate redundancies created as a result of the merger with Merrill Lynch and to reflect the current recessionary environment,” the bank said in a statement. “Bank of America continues to do business actively with all of its client segments. It continues to (attract) deposits and new client relationships. In addition, the company continues to actively originate loans through all of its credit product lines.”
Including Bank of America, the financial services industry has shed more than 250,000 jobs this year, according to Challenger, Gray & Christmas. That's compared to 153,000 in all of 2007 – the year the credit crisis first began to whack bank earnings.
Though the bank wouldn't say which lines of business will be most affected by layoffs, analysts speculate that Bank of America's brokerage unit could be particularly vulnerable. Merrill's famous “thundering herd” of almost 17,000 advisers was a main driver of Bank of America's decision to buy Merrill, and Bank of America's own brokerage unit, with 2,000 advisers, isn't on the same level, some analysts say.
Bank of America's corporate and investment bank, which has already been shedding jobs in the credit crisis, could also be in trouble. Merrill's CEO, John Thain, is to lead the combined company's investment banking unit – a sign that Merrill's culture will trump Bank of America's in that area.
One employee told the Observer that cuts have already started in the recruiting area, which she said laid off about 115 workers this week. The Wall Street Journal and Bloomberg News reported that job cuts are being announced this week in the U.S. equity-research departments of both banks, an effort to slash overlapping jobs.
Bank of America also announced some management shakeups yesterday, saying that general counsel Timothy Mayopoulos is leaving the company, and that credit-card chief Bruce Hammonds is retiring, without giving reasons.
The looming job cuts were a popular topic among shareholders who spoke out at last week's meeting in Charlotte, when investors approved the Merrill Lynch deal. One shareholder told bank CEO Ken Lewis that he and other executives should donate their salaries to employees who are about to get laid off. “These individuals should be happy that they are not one of the 30,000 who will be given their walking papers,” said Judith Koenick, a Maryland shareholder who said she's a former schoolteacher.
The actions of big banks are under particular scrutiny now that the government has spent billions buying preferred shares in them, a plan meant to stabilize a fragile industry with government dollars. Bank of America has repeatedly said that it didn't want or need the government money, but that hasn't quenched the ire of some observers.
Said one Charlotte woman, the wife of a Bank of America employee who was laid off last year: “We bailed them out, and this is what the average taxpayer gets in return.”