Bank of America Will Cut 650 Investment Banking Jobs

Bank of America Will Cut 650 Investment Banking Jobs

Jan. 15 (Bloomberg) -- Bank of America Corp., the second- largest U.S. bank, plans to cut 650 jobs from its corporate and investment bank and sell the prime brokerage unit that caters to hedge funds.

The bank is slashing its so-called structured products business, which packaged and sold real estate loans to investors, and will reduce investment banking in Europe and the U.S., Chief Executive Officer Kenneth Lewis said in a meeting with reporters today in New York.

Lewis, who told investors in October he'd had ``all the fun I can stand in investment banking'' after about $2 billion of writedowns and trading losses, said today the bank is still committed to the unit. Bank of America remains a market leader in syndicated lending and leveraged finance, and the business is important to the company's success, he said.

``We've never been an investment-banking wannabe,'' Lewis said, adding that he regrets his previous comment because it created misperceptions about the unit. ``Where we choose to compete, we will win.''

The job cuts, 12 percent of the unit's staff, are in addition to previous plans to fire 3,000 people, including 500 in the corporate and investment bank, Lewis said. The entire company employs about 220,000 people, he said.

Stock Decline

Bank of America fell $1.28, or 3.3 percent, to $37.94 at 3:17 p.m. in New York Stock Exchange composite trading. The Charlotte, North Carolina-based company has lost 8.1 percent this year.

Lewis, 60, didn't disclose the financial impact of today's announcement. The company will report its fourth-quarter earnings on Jan. 22. The division's profit plunged 93 percent to $100 million in the third quarter.

The review of the investment bank was led by Brian Moynihan, 48, whom Lewis named last October to replace Eugene Taylor, 60, as head of the unit. Other departures included top managers from investment-grade bond trading, prime brokerage, global equities and global structured products.

Bank of America is paring securitization units, including people involved in collateralized debt obligations and mortgage- backed and asset-backed securities, Moynihan said. The investment banking unit will cut positions in some undisclosed industries, while adding to other areas, he said.

Continuing Slump

The moves reflect the bank's view that the market for selling packages of real estate and other asset-backed loans will remain dormant for some time, Moynihan said.

The bank wouldn't say where the dismissals will occur, though most of its investment bankers are based in Charlotte, London and New York. Bank of America will have no problem filling its new skyscraper in Manhattan, Lewis said.

Bank of America isn't concerned about losing investment bankers to competitors, Moynihan said, adding that he expects to attract employees from rival institutions. Some former investment banking leaders have already left because they expected the reductions announced today, Lewis said.

Bank of America is shaping its corporate and investment bank for business conditions more like 2005 than the past two years, when securitizations of real estate loans produced a surge in revenue, Lewis said.

Reversing Course

The moves reverse a strategy outlined by Taylor at an investor conference last February, when he said Bank of America would boost corporate and investment banking profit by 70 percent and revenue by 50 percent over five years. The goal was to gain a top-three share of investment banking in the U.S.

Lewis has helped transform Bank of America since becoming CEO in 2001. The company spent about $25 billion last year to buy ABN Amro Holdings NV's LaSalle Bank in Chicago and U.S. Trust Corp. from Charles Schwab Corp. to increase Bank of America's retail banking and asset-management units.

Lewis invested $675 million since 2004 in corporate and investment banking to compete with companies including New York- based Citigroup Inc. and JPMorgan Chase & Co. for leveraged buyouts, merger advice and trading.

Bank of America, the biggest U.S. bank by market value, agreed last week to buy Countrywide Financial Corp. for about $4 billion, taking over the largest mortgage lender during the worst housing slump in more than two decades.

``We knew it was the mother of all due diligence deals,'' Lewis said. ``It's an opportunity that came to us. We didn't seek it.''

Domestic Focus

The bank continues to invest in the U.S. because an internal study and a separate McKinsey & Co. report both concluded that the largest absolute amount of potential fee revenue will come from the domestic market, Lewis said. He added that the bank's investments in banks in China and Mexico are among ``the most successful investments that any bank has ever made.''

Bank of America's prime brokerage ranked sixth in assets with $5.5 billion, according to a 2006 HedgeWorld Prime Brokerage survey. Bear Stearns Cos. ranked first. Efforts to sell the business have just started, Moynihan said.

In past years, Wall Street securities firms collected about $8 billion annually in fees providing prime-brokerage services such as lending, clearing trades and record-keeping that help managers run their hedge funds.


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