A few months ago we pointed out that mass layoffs were coming for bankers due to declining revenues and more difficult market conditions, and now we're seeing the first major wave of that come to fruition.
Bank of America has announced that it will fire as many as 8,000 employees within its consumer division the FT reports.The core reason given for the headcount reduction in this instance is that digital banking is picking up the pace, and has reduced the need for "back office staff" and bank tellers.
This is a trend that BofA highlighted in its In its Q1 earnings press release, as the bank showed that mobile banking users had shot up 15% y/y.
The bank has already slashed headcount by more than 10,000 in 2015, and has cut almost 40,000 from its consumer division alone since 2009 (bringing the total at the end of Q1 to 68,400). The layoffs are in line with what has been happening to its retail branch count, which has fallen by about 1,400 over the past seven years. Thong Nguyen, president of retail banking told a conference in New York this week that the numbers would "probably go down to the low 60s", implying as many as 8,000 layoffs are on the horizon.
The division is critical for BofA, accounting for roughly 66% of the bank's Q1 net income.
As the FT points out, BofA is especially exposed to monetary policy as it has a significant domestic retail presence. Due to central planning around the globe, rates have plummeted, leaving banks to find other measures to put a floor under profitability. Said another way, banks need to cut costs and cut them quickly in order to mitigate the squeeze on NII.
"We're not waiting for the rates to come up to keep driving the increase in profitability" Nguyen said.
Alas, although the Fed did hike in December, BAC has under performed its peers since that date - meaning the bank has a lot of catching up to do in order to soothe investor concerns, and these cost cutting measures play a part in that effort.
On another note, as global yields continue to plunge and the UST curve continues to flatten as investors chase any yield that's left out there, the entire financial sector will continue to get squeezed, no matter how much cost is driven out of the business.