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What Makes BofA (BAC) Consider Another Round of Layoffs?

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A new wave of layoffs is soon expected at Bank of America CorporationBAC . The news was first reported by the Wall Street Journal, citing persons familiar with the matter.

Of late, BofA has been witnessing improvement in its financial performance, with its cost-saving program - Project New BAC - experiencing immense success. As of Jun 30, 2015, the company had approximately 216,700 employees.

So, why is BofA trimming its workforce and which segments will be affected?

Recently, at Barclays Global Financial Services Conference in New York, BofA CEO Brian Moynihan had stated that in case rates do not increase, management would have to make further efforts to check expenses. He went on to mention, "Let me assure you, if the revenue environment weakens or interest-rate structures don't move up and the economy slows down, we'll have to take out more costs."

Hence, as the Federal Reserve decided not to hike rates and BofA is already facing strain on revenues, slashing jobs is indeed an option.

At the same conference, Moynihan had projected a of 5-6% reduction in trading revenues for the third quarter of 2015. While revenues from bonds, currencies and commodities trading are anticipated to decline, increased revenues in the smaller equities trading group are expected to offset the downfall to some extent.

Therefore, job cuts will take place in BofA's Global Banking and Global Markets segments, with nearly 200 employees losing their jobs.

Though investment banking segments of all major Wall Street banks continue to struggle in their attempts to regain foothold after the 2008 crisis, BofA has undoubtedly been hit the hardest. Notably, in the first half of 2015, the company was the lone major U.S. bank to record a fall in trading and investment banking revenues.

Further, the current global concerns related to slowdown of Chinese economy and weakness in several other major economies including Europe, Brazil and Japan will likely exert pressure on trading income. So we believe job cuts will continue to be make headlines not just for BofA but for other banks like JPMorgan Chase & Co JPM and Citigroup Inc. C as well.

Currently, BofA carries a Zacks Rank #3 (Hold). A better-ranked major bank is Wells Fargo & Company WFC with a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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