Worry as US bank slashes jobs
BANK of America is shedding 12,500 jobs worldwide as part of a move to justify the $48bn (£26.3bn) it spent buying FleetBoston Financial last year.
The news is likely to create concern in Britain where the bank employs 2,000 staff, and recently moved two of its London trading offices to Canary Wharf. It has back-office and treasury functions in Bromley and Croydon.
The cuts amount to 7% of the 180,000 workforce of the two banks combined. The merger, finalised on 1 April, makes Bank of America the second-largest bank in the US.
Analysts were critical of the high price when the merger was announced but BOA chief executive Kenneth Lewis said that a key factor was the $1.6bn cost cuts he would be able to make at the merged institution.
The purchase price represented a premium of more than 40% for Fleet, which looked extremely high at the time. Other large bank mergers, such as JP Morgan Chase's purchase of Bank One, and a rising stock market have, however, helped to justify BOA's deal.
As consolidation in the US banking industry has continued, the merger has increasingly come to seem strategically farsighted although it remains to be justified financially. The merged bank has 36m customers in 29 states, and almost $940bn in assets.
Bank of America said it would start cutting jobs this month. 'When we discuss job reductions, we are talking about positions, not necessarily people,' chief financial officer Marc Oken said. 'These are difficult decisions.'
However, Larry Puglia, manager of the T Row Price Blue Chip Growth investment fund, said: 'They feel like they have something to prove to Wall Street to convince investors like ourselves that they didn't pay to much for Fleet. It is an unfortunate aspect of entering into large mergers like this that there will be some job losses.'
The bank said that about a third of the job losses would be through attrition. The cuts follow a decision to set up an Indian subsidiary to save money by moving more jobs offshore. A new centre in Bangalore is still being built.
