LOS ANGELES — Bank of America is preparing to slash 40,000 or more jobs nationwide, a dramatic retrenchment that reflects the deepening woes of the country’s largest bank and the magnitude of the U.S. economic slowdown.
The layoffs will come mainly from the Bank of America’s sprawling consumer-banking operations. The bank’s workforce numbers nearly 300,000.
The details of the cutbacks were not officially announced, but the information was disclosed by three Bank of America executives who have been briefed on the plan but were not authorized to speak publicly. Brian Moynihan, Bank of America’s beleaguered chief executive, is expected to unveil details at an investor conference Monday in New York.
Executives met at the bank’s Charlotte headquarters Thursday and Friday to finalize the plan, which has been under discussion for months. Moynihan is grappling with how to wring more profit from the bank’s core customer base, which includes about 58 million consumer and small-business accounts.
At least one analyst said the cutbacks could weigh heavily on Bank of America’s millions of customers, who would have to deal with fewer branches and longer lines for tellers.
“You’re definitely going to see decreased service levels for consumers,” said Christopher Whalen, a bank analyst at Institutional Risk Analytics. “They’re talking about either closing branches or reducing the head count in the branches.”
Moynihan hopes to fashion a smaller but more focused company that can withstand the fallout from its disastrous 2008 takeover of mortgage lender Countrywide. The home-lending unit has run up $30 billion in losses and faces billions of dollars more in potential liability from a barrage of mortgage-related lawsuits.
Federal regulators and private investors allege that Countrywide misled them about the quality of loans and bonds tied to high-risk mortgages bought during the housing boom. Earlier this month, federal regulators sued Bank of America and 16 of its rivals, contending that the banks sold loans to housing goliaths Fannie Mae and Freddie Mac under false pretenses.
Bank of America’s retrenchment is also being driven by the slack U.S. economy and darkening outlook for the banking industry. Intensifying worries about its prospects have cut Bank of America’s stock price by more than half since mid-January, a far larger hit than its peers have suffered.
“The financial-services industry as a whole is going to shrink,” said Nancy Bush, a banking analyst and contributing editor at research firm SNL Financial. “We don’t need as many loans, as many credit cards, as many mortgages as we did in the past two decades.”
The flailing economy has struck particularly hard at Bank of America, which critics say has been beset by poor management and a flawed growth strategy of rapid-fire acquisitions of other companies. To overcome its woes, Bank of America executives have worked for much of the past year on the ambitious restructuring known as Project New BAC, a reference to the ticker symbol for the company’s stock.
Moynihan has made a number of bold steps in recent weeks, including signing on billionaire Warren Buffett as a major shareholder. This week he ousted two senior executives, including Sallie Krawcheck, one of the highest-ranking women on Wall Street.
The first phase of New BAC is designed to streamline the consumer businesses, including home loans, credit cards and wealth management. It also will make cuts in the corporate support staff, such as legal, marketing, human relations and finance employees.
The bank previously had announced an additional 6,000 job cuts this year. Critics have urged Moynihan to go even further as he launches a second phase of the BAC project, which will analyze potential cost cuts and restructurings at some of the business lines focused on corporate and institutional clients.