Digital Banking Revolution To Cause More Layoffs At BofA?

In this era of digital competition, being tech-savvy is more of a necessity even for a traditional industry like banking. To keep pace with the technologically sophisticated customers, financial institutions are keen to integrate new digital technologies into their system. Bank of America Corporation (NYSE:BAC) , which is treading a similar path, is reducing its brick-and-mortar branches as well as headcount to use more of digital media.

In this context, more than 8,000 employees are set to be eliminated in BofA’s consumer banking business in the wake of shifting inclination of the customers toward digital banking, which has lowered the requirement for back-office staff and bank tellers. The news was first reported by the Financial Times.

However, per the report, BofA is planning to add sales staff including mortgage loan officers, small business bankers and personal investment advisers with an aim to boost revenues.

Nonetheless, the overall workforce is expected to go down by several thousand due to the digital banking revolution and the cuts will most likely come from attrition rather than blatant layoffs.

Thong Nguyen, president of retail banking and co-head of consumer banking, said at the Morgan Stanley Financials Conference that the numbers would “probably go down to the low 60s.”

BofA has already reduced headcount at its consumer arm from 100,000 a few years ago to around 68,400 at the end of the first quarter of 2016. Along with this nearly 40,000 jobs cut since 2009, BofA has shrunk its branch network to about 4,700 from nearly 6,100 some years back.

According to Nguyen, the bank plans to reinvest the savings made from branch closures and staff reductions into future technologies to make digital banking better and more secure. “For three people that I’m taking out of the teller line, I’m going to reinvest two into the sales force,” he said.

“Just to give you an idea, the salespeople used to be 5% of our employee base,” Nguyen added. “Today, it's 30%. So out of 68,000, think of that as a third of salespeople deployed in the financial centers and the contact centers.”

A decade back, this banking behemoth flaunted a coast-to-coast network of physical locations, which gave it a competitive edge over its peers. However, BofA has closed or sold numerous branches over the past year, attributable to the economic and technological changes.

While the closure of branches has helped BofA achieve improved efficiency and cost savings, the bank’s steps to deepen its roots in the technologically advanced world has ensured the continuation of its competitive advantage.

Bank of America Merrill Lynch recently launched a new electronic platform, Instinct Loans, to improve liquidity in the leveraged loan market. The platform will simplify and enhance the market by combining innovative technology with market-leading sales and trading professionals.

Also, BofA has been slashing jobs in its investment banking and trading units. The intention is to keep its quarterly operating expenses below $13 billion in 2016 and improve profitability as the company has been struggling to grow revenues over the last several quarters owing to an uncertain macroeconomic backdrop. The company’s shares have fallen over 20% year-to-date, as against a rise of over 1% in S&P 500.

With the overall market conditions remaining volatile and expectation of improvement in trading business unlikely, banks across the globe are slashing workforce to maintain profitability. Several global banks such as Morgan Stanley (NYSE:MS) , Credit Suisse (SIX:CSGN) Group AG (TO:CS) and Deutsche Bank AG (NYSE:DB) have been announcing their plans to layoff workers.

Currently, BofA holds a Zacks Rank #4 (Sell).