Amid the banking industry's relentless belt-tightening, even Bank of America Corp.'s (BAC) moneymakers aren't safe.
The Charlotte, N.C., company is planning about 2,000 staff cuts in its investment banking, commercial banking and non-U.S. wealth-management units, said people familiar with the situation. Those operations were vastly expanded with Bank of America's 2009 purchase of Merrill Lynch & Co.
The reductions are significant because of whom they target: the high-earning employees whose efforts helped Merrill Lynch account for the bulk of Bank of America's profit since the financial crisis.
The cuts come on top of a plan announced last year that will see Bank of America eliminate 30,000 jobs over three years in its consumer banking divisions. The bank employed 278,700 people as of March 31.
The move is the latest effort by Chief Executive Brian Moynihan to show investors he can bring expenses under control at a time of sluggish U.S. growth and revenue-reducing federal regulations. Personnel expense at Bank of America rose 17% between 2009 and 2011--a period in which revenue dropped 22%.
The No. 2 U.S. bank by assets already is facing a wave of high-profile defections in its institutional businesses, such as investment banking, amid Wall Street's annual post-bonus job-hopping season. The upheaval comes as investors are pressuring banks to rein in expenses without giving ground competitively. Despite a 46% rise this year, Bank of America shares have lost a third of their value in the past year, amid questions about the industry's profit outlook.
Other banks such as UBS AG (UBS) and Goldman Sachs Group Inc. (GS) also are struggling to bring down costs and retain talent. In the second half of 2011, two dozen global financial firms set plans to cut 103,000 jobs.
Some of Bank of America's cuts are part of a multiyear overhaul called Project New BAC, after the bank's ticker symbol. The bank has told regulators it could sell off parts of its U.S. franchise or its U.S. trust business if economic conditions were to worsen significantly, according to people familiar with the situation.
Bank of America declined to comment.
Cutbacks aren't Bank of America's only response to surging costs. The bank is loath to cut too deeply in businesses, such as the fixed-income trading operation, that are showing improvement and highly competitive. One structural shift being planned will pool junior investment-banking employees across different industry sectors so the younger bankers can be routed to whatever area is most in demand at that moment, said people familiar with the situation. Proponents say that move will help younger workers gain experience, while others say it will detract from the bank's service to clients.
Many Merrill Lynch holdovers, particularly in London, left in the wake of the acquisition by Bank of America, and some of the company's top leaders within investment banking now have no ties to either Merrill or the old Bank of America.
In the past month, several high-profile Merrill veterans departed as it became clear they wouldn't hold high-profile spots following the company's reorganization of that unit. One of those who left was key international deal maker Andrea Orcel, who in April joined UBS. The defection comes as Bank of America, which has long focused on the U.S., tries to establish itself as a major deal maker around the world. The loss of Orcel could be damaging if his clients desert Bank of America.
Several other former colleagues of his based overseas have also left to join UBS since his departure, which has riled his former employer, according to a person familiar with the situation. Orcel was among those responsible in recent years for bringing in more than $200 million in annual fees from a group of roughly 20 clients, such as UniCredit SpA (UNCFF, UCG.MI), where Orcel has close-knit relationships, according to people familiar with the bank.
