Bank of America Corporation
) continues to streamline its business with the recent disclosure
of plans to downsize further. BofA intends to close three foreign
offices, which will lead to reduction of nearly 3,000 jobs within
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These branches are a part BA Continuum, a non-bank subsidiary of
BofA. Nevertheless, the Indian counterpart will remain unaffected
by the ongoing business operation review.
The offices to be shuttered are technology and operation sites
that support San Jose, Costa Rica; Guadalajara, Mexico and Taguig
City, Philippines. These offered services to various divisions of
BofA including the mortgage and insurance business.
Some of the services offered by the branches will be transferred
to other units of BofA in the long run. However, the bank's
latest move clearly reflects its intention to reduce its mortgage
In the initial phases of economic recovery, banking giants like
BofA capitalized on the low interest rates to boost the mortgage
lending business. However, with recovery in the housing market,
the price of real estates is on the rise. Moreover, with
initiation of the Fed tapering, interest rates are expected to
rise as well.
Hence, now investors have to buy costlier properties with loans
that have higher rates of interest. This has consequently dragged
the demand for mortgage loans. In the past few quarters, banks in
the U.S. including BofA,
JPMorgan Chase & Co.
Wells Fargo & Company
) have witnessed weak performances in their respective mortgage
In the present economic scenario that offers limited scope for
top-line growth, major banks like BofA are resorting to
aggressive cost cuts to maintain profitability. Therefore, the
company's latest move to do away with units that support a
relatively unprofitable business seems justified.
At present, BofA has a Zacks Rank #4 (Sell).