Bank of America on Tuesday announced plans to cut as many as 4,000 positions before the end of June even after it reported first-quarter profits that beat expectations.
The job cuts represent 2 per cent of BofA’s overall workforce, which topped 217,000 at the end of the first quarter after the lender had ramped up hiring as the job market heated up during the pandemic era. The bank’s headcount had grown 4 per cent in the year to the end of March, based on data it released as part of its earnings announcement.
BofA said it had already slashed more than 1,000 positions in the first two weeks of April and planned to eliminate an additional 3,000 jobs by the end of the quarter. BofA said it would not replace staff leaving the bank and that these departures accounted for the bulk of the cuts.
Chief executive Brian Moynihan said during the bank’s earnings call that the cuts were prompted by a cooling jobs market and should not be viewed as a sign that it was bracing for a slowdown in its business.
Moynihan said competition for talent on Wall Street and elsewhere had caused the bank to bulk up its workforce, but that attrition rates had fallen off sharply in recent months, prompting a rethink of its headcount.
“The forecast is for a recession in the second half of the year, but we don’t see consumer activity slowing to a pace that indicates that,” Moynihan told analysts on the earnings call. “Everything points to a mild recession, but we will see what happens.”
The announcements came alongside BofA’s earnings that showed profits rose 15 per cent in the first quarter from a year ago to $8.2bn, or 94 cents a share. Analysts had forecast that its quarterly profits would decline amid the fallout from the collapse of Silicon Valley Bank.
The strong results at BofA and other large banks underscore how reforms implemented in the wake of the 2008 financial crisis have improved the resilience of the largest US lenders.
Like its rivals, BofA benefited from higher interest rates, as well as a rise in trading because of the recent turmoil in financial markets. Revenue from debt and commodities trading surged 27 per cent in the quarter, though a slump in the stock market drove a 20 per cent decline in its equity market trading revenue.
Uncertainty over the stability of regional banks following SVB’s implosion in March led many depositors to move their money to larger lenders. BofA said deposits, which had declined in the first two months of the year, rose around the time of SVB’s failure.
Overall, the bank’s deposits fell slightly in the quarter, down 1 per cent, to $1.9tn. By contrast, JPMorgan added $37bn in new deposits during the first three months of the year.
Loans outstanding at BofA rose 7 per cent in the quarter, while profits from lending climbed 25 per cent. The bank’s revenue from processing transactions rose 47 per cent, and it said credit and debit card customers spent 6 per cent more than in the same quarter a year ago.
Stronger profits from lending were enough to offset continued weakness in deal activity, as fees in its investment banking business dropped 20 per cent.
Still, there were signs that BofA was preparing for a more turbulent economy. Along with the job cuts, BofA set aside $934mn for potential credit losses in the quarter, up from less than $50mn a year ago. The bank also significantly increased the amount of cash it has on hand, and cut the size of its investment portfolio, which has dropped in value because of the recent rise in interest rates.
In recent months, analysts and investors have questioned whether the bank had erred in putting so much of its extra cash into bonds in 2020 and 2021, at a time when interest rates were at historically low levels.
The bank’s unrealised losses in its bond portfolio shrunk slightly in the quarter to $103bn, but were still larger when compared with rivals. Alastair Borthwick, chief financial officer, signalled that some of the cash management moves were related to increased scrutiny of banks’ bond holdings following SVB’s failure.
“Cash is simpler to understand,” said Borthwick. “It gives us more options during a period of volatility.”
BofA shares rose 0.6 per cent in New York on Tuesday.
The piece has been amended to reflect the bank’s deposits fell to $1.9tn