Bank of America Corp
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 Thursday.
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 & Woods Inc.
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.
Bank of America is part of a growing list of large banks trimming jobs.
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
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 Journal.
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 employees.
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
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
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 Stock Exchange.
(Additional reporting by Soham Chatterjee in Bangalore; Writing by Vinu Pilakkott and Jed Horowitz; Editing by Lincoln Feast, Dave Zimmerman)