Following the layoff in Charlotte, North Carolina on Tuesday, shares of the Bank of America Corporation (NYSE:BAC) gained 1.12 percent after it closed at $15.35 at the late trading session. The multinational banking and financial services corporation has been in a tight trading range after the volatility in the first half of the month.
Bank of America’s Cost Cutting
As part of the company’s “Simplify and Improve” program, around 30 Charlotte-based technology and operations positions were cut. The bank’s spokesperson explained that the notifications had been ongoing and reflect their previously announced efforts to simplify their company for their customers and clients.
Prior to this, the Bank of America had disclosed its intention to implement cost cutting last July. Based on the reports, the second largest bank in America initially wanted to lessen the non-interest expenses year-over-0year to $53 billion in the next two years, higher than $56.3 billion noninterest expenses last year.
Further to this, the bank reduced approximately 2.600 jobs in the second period of 2016. Charlotte-based executive Cathy Bessant announced that there could be around 100,000 employees and contractors globally and that comprises of 6,000 employees from the branch in Charlotte.
In the previous years, most of the layoffs in Charlotte were from the mortgage, technology, marketing and communication segments. This time around, the Bank of America has taken out employees from its global banking and markets divisions.
BOA Remains Optimistic
It could be a wise decision for the bank to impose a layoff amid the pressure from investors. Most of the banks are now challenged by the prevailing impact of post-Brexit and the indecision from the Federal Reserve.
Bank of America CEO Brian Moynihan has been clear on its goal to improve the company’s profitability despite the low interest rates and revenues around the banking industry. The central banks of the emerging economies have kept their interest rate unchanged and some imposed a rate cut. Investors are faced a great deal of low and negative interest rate.
The BOA recently presented its 2Q16 10Q at the Securities and Exchange. According to its filing, the bank increased interest rate sensitivity. It showed that liquidity shift away from cash in favor of mortgage-backed securities and mortgage prepayment speed assumptions. Although the rationale behind these little vague, the bank assumed that investors would see the relevance of the assumptions.
More Layoffs?
In the first quarter of the year, a research came out that banks would probably consider layoff in the long run as the industry becomes highly automated.
Citi Global Perspectives & Solutions (GPS) wrote in their report that “Banks' Uber moment will mean a disintermediation of bank branches rather than the banks themselves. Specifically, it will mean the shift to mobile distribution being the main channel of interaction between customers and the bank.”
Evidently, the number of branches and people that a certain bank may need would decline in the coming years. More and more people are getting engaged in technology and the fact that everything comes easy by simply tapping the internet connection was a great challenged for some banks. On the other hand, they may use this innovation to their advantage, however, staff rebalancing is inevitable.