BofA looking to cut $5 billion in annual costs
Bank of America Corp is looking to reduce annual expenses by $5 billion by 2013 through its cost-cutting initiative, Chief Executive Officer Brian Moynihan said.
The program -- known as New BAC after the company's stock symbol -- is focusing on consumer banking and the bank's systems architecture for now, he said. The second phase will focus on institutional client businesses such as corporate banking.
Bank of America built itself through acquisitions over decades and, according to analysts, has not properly integrated systems or closed unnecessary branches. The bank had 5,700 branches nationwide and 287,000 employees as of June 30.
Media reports on Friday said the bank was targeting 40,000 job cuts over the next three years as part of the cost-cutting program.
The bank is targeting an expense-to-revenue ratio to 55 percent and is cutting from roughly $73 billion in annual expenses.
Bank of America has about 50 senior employees reviewing some 150,000 ideas for cutting costs, Moynihan said. He disclosed details of the New BAC program at a Barclays Capital financial services conference.
Bank of America shares have lost nearly half their value this year amid rising fears the bank will need to sell more shares to boost its capital levels.
By many estimates, the bank will need to raise about $50 billion in coming years to meet new global capital requirements, a level the bank says it can reach through earnings and asset sales.
Investors fear mortgage settlements could boost the bank's capital requirements, and that any stock offering would further dilute shareholder equity. The bank's share count has risen from 4 billion in 2007, before the financial crisis peaked, to more than 10 billion this year.
The bank's share price decline was temporarily arrested in late August by a $5 billion investment from billionaire Warren Buffett, who purchased preferred stock and warrants to buy 700 million common shares over the next decade.
At first, news of the Buffett investment sent Bank of America shares soaring more than 20 percent, but they have since retreated to levels seen before the investment.
At the Barclays conference, Moynihan said the bank was not required by regulators to seek outside capital. He also said the Buffett deal was "absolutely the right thing" for the bank to do.
Bank of America were up 3 cents to $7.01 in morning trading.
[Source: By Joe Rauch, Reuters, NY, 12Sep11]
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