CHARLOTTE, N.C. (AP) – After a tough third quarter, Bank of America Corp. has become the latest bank to slash jobs due to poor results brought on by the unrest in global credit markets.
The nation's second-largest bank said Wednesday that it is cutting 3,000 positions in its investment banking unit, a day after crosstown rival Wachovia Corp. starting eliminating several hundred positions for the same reasons.
Bank of America's announcement came less than a week after it reported a 32 percent drop in third-quarter earnings, as trading losses and write-downs on a wide variety of loans offset solid revenue growth in most businesses.
The cuts will affect less than 2 percent of the company's staff. Most of them will be from Bank of America's Global Corporate and Investment Banking unit, the company said.
The Charlotte-based bank also said it is launching a strategic review of its investment banking business.
“While some of these changes are a direct result of our underperformance, others have been contemplated for a number of months as we looked at how we could operate more effectively,” Bank of America Chief Executive Kenneth D. Lewis said in a statement. “We must have a platform that operates profitably for both our company and our clients.”
Among the changes, Bank of America veteran and vice chairman Gene Taylor will retire at year end after a 38-year career with the bank. He will be succeeded by wealth management head Brian Moynihan, who joined the company with the 2004 acquisition of FleetBoston Financial Corp.
Moynihan, who ran the company's Global Wealth and Investment Management business, will be replaced by Keith Banks, who runs the Columbia Management mutual funds arm, which is part of Bank of America's asset management organization. As of Wednesday night, no successor for Banks had been named.
Bank of America said last Thursday that its net income declined to $3.7 billion, or 82 cents per share, from $5.42 billion, or $1.18 per share, a year ago, and revenue fell 12 percent to $16.3 billion.
The dismal performance was a major setback for Lewis and his goal to build a major investment banking presence on Wall Street.
“I've had all of the fun I can stand in investment banking at the moment,” Lewis said last week after the third-quarter results were announced. “So to get bigger in it is not something I really want to do.”
The job cuts, which the company said come “in light of market conditions and strategic imperatives,” are throughout the bank, but the majority are in areas such as business lending, treasury services, and capital markets and advisory services, as well as support staff. The Global Corporate and Investment Banking unit is largely based in New York but has a Charlotte presence.
Last week, Chris Hentemann, head of Bank of America's global structured products unit, left the company.
Hentemann had been in charge of products such as mortgage-backed and asset-backed securities and related trading. Such investments — especially subprime mortgages made to borrowers with weak credit — plummeted in value this summer as rising defaults and foreclosures discouraged investors and led credit markets to seize up.
Bank of America announced Wednesday's cuts after stock markets closed. The bank's shares fell 26 cents in extended trading after falling 30 cents to end the regular session at $47.48.
Most major banks reported a tough third quarter.
Wachovia, which saw its third-quarter profit fall 10 percent due to unrest in the nation's credit markets, said Friday it planned to eliminate about 200 jobs within its investment bank by year end. On Tuesday, the bank started informing employees of the job cuts.
Shares of Wachovia hit a new 52-week low Wednesday after a Banc of America Securities analyst downgraded the stock, citing challenges for the investment bank and the potential for an above-average credit burden going forward.
Wachovia shares traded as low as $44.22 Wednesday before closing at $45.40, a 57 cent loss, on heavier-than-usual trading volume.
At Citigroup Inc., the nation's largest bank, third-quarter profit fell 57 percent to $2.38 billion. New York-based Citigroup announced before reporting its earnings that it was combining its investment banking and alternative investments units into one business. Several executives left the bank.
The newly combined unit will be led by former Morgan Stanley executive Vikram Pandit, who has been running Citigroup's alternative investments unit for several months.