Bank of America Corp on Wednesday said it planned to eliminate 3,000 jobs, and shook up its corporate and investment bank after a dismal quarter at that unit led to a 32 percent drop in overall profit.
The second-largest U.S. bank said a majority of the cuts will be in corporate and investment banking, and the rest elsewhere. The cuts amount to 1.5 percent of the bank's 198,000-person workforce.
As part of the changes, Bank of America named Brian Moynihan, 48, as president of global corporate and investment banking, replacing Gene Taylor, a 38-year veteran of the bank, who will retire at year end.
Moynihan has been head of global wealth and investment management. Keith Banks, 51, chief investment officer of the Columbia Management asset management unit, will replace him.
A retrenchment at Bank of America was widely expected after a $1.46 billion trading loss led to a 93 percent decline in third-quarter profit from corporate and investment banking. That limited overall profit to $3.7 billion, well below Wall Street forecasts.
It's a positive sign, said Mark Batty, an analyst at PNC Wealth Management in Philadelphia, which invests $77 billion and owns the bank's shares. There was poor risk taking this quarter, and it's logical that you'd see something like this.
Bank of America was not immediately available for further comment.
The Charlotte, North Carolina-based company also said it has launched a strategic review of corporate and investment banking to determine how the unit can operate better.
While some of these changes are a direct result of our underperformance, others have been contemplated for a number of months, Chief Executive Kenneth Lewis said in a statement.
The vast majority of our company is performing quite well, he continued. There are areas where we need to improve ... We must have a platform that operates profitably for both our company and our clients.
TOO MUCH FUN
The moves are a setback for Lewis, who in 2004 undertook a $675 million expansion of the corporate and investment bank to become a stronger competitor against rivals such as Citigroup Inc and Goldman Sachs Group Inc.
Like many rivals, Bank of America got burned last quarter as credit markets tightened, resulting in losses from trading, leveraged loans and structured products.
On October 18, when discussing quarterly results, Lewis voiced his displeasure when he told analysts: I've had all of the fun I can stand in investment banking at the moment.
Wachovia Corp, the fourth-largest U.S. bank, on Tuesday began laying off 200 of its own investment banking employees after quarterly earnings in its corporate and investment banking unit fell 80 percent.
Moynihan is Bank of America's most senior executive from the former FleetBoston Financial Corp., which it acquired in 2004.
Bank of America is building a 51-story office tower near New York's Times Square that has been intended to house growing investment banking operations. It was not immediately clear how the cutbacks would affect the bank's use of that building.
The bank remains by far the largest U.S. retail bank, with 5,748 branches and nearly 10 percent of deposits nationwide.
Bank of America shares closed Wednesday down 30 cents at $47.48. They have fallen 11 percent this year.