Bank of America Corp., the second biggest U.S. lender by assets, may trim annual costs by as much as an additional $3 billion in the next stage of Chief Executive Officer Brian T. Moynihan's efficiency plan.
The firm, which has already targeted $5 billion in expense cuts from retail and back-office operations, may reach total savings of $6 billion to $8 billion a year, Moynihan said during a Jan. 19 employee meeting. The latest phase of his effort examines investment and commercial banking, trading, and wealth- management units and is scheduled to be completed in April.
Moynihan, 52, is relying on cuts after mortgage losses and increased U.S. regulation drained revenue last year. In the first part of his plan, dubbed Project New BAC, the CEO announced 30,000 job cuts from consumer banking, credit-card, home loan and support operations at the Charlotte, North Carolina-based lender.
Managers will reduce the "overall cost structure of the company; through New BAC we've identified $5 billion," Moynihan said last week. "We'll pick up more in Phase 2, that ought to get you $1.5 billion to $2 billion a quarter" in total savings.
Moynihan has told analysts that his latest round of cost cuts will yield smaller savings than the first because there are fewer employees in corporate and institutional units. He first unveiled details of his plan, which divides the company in half, each with roughly $27 billion in annual expenses, in September. Larry DiRita, a spokesman for the bank, declined to comment on Moynihan's remarks to employees.
Boosting Profit
The lender posted a $1.99 billion fourth-quarter profit fueled by one-time gains including the sale of holdings in a Chinese bank. Analysts including Todd Hagerman of Sterne Agee & Leach Inc. estimated the core results were a loss.
The bank had $4 billion in net revenue before taxes and provisions in the quarter, Chief Financial Officer Bruce R. Thompson said during last week's meeting. The company aims to more than double that figure to $10 billion, mostly through cost savings and improved trading results, he said.
"This has got to be a change we make very quickly," Thompson said. "It's going from getting capital and liquidity, to getting back to, 'How do we get the earnings stream of this company back to where we want it to be?'"
