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NEW YORK - BANK of America Corp said on Tuesday it would eliminate 650 corporate and investment banking jobs and sell its prime brokerage unit, as the second-largest US bank retrenches in the face of difficult credit market conditions.
The cuts affect about 12 per cent of capital markets and investment banking workers, and follow a review announced in October, when Chief Executive Kenneth Lewis said, 'I've had all of the fun I can stand in investment banking.' The cuts are in addition to about 500 cuts made late last year as part of an overall reduction of 3,000 jobs companywide.
Bank of America will trim operations in structured products such as mortgage and asset-backed securities and collateralised debt obligations. It also plans to cut some non-US businesses while retaining a focus on debt, cash management, and trading of rates and foreign exchange.
Prime brokers typically provide trading, lending, cash management and other services to hedge funds. The job cuts do not affect Bank of America's prime brokerage.
Mr Lewis vowed cuts after poor trading results pushed third-quarter profit down 93 per cent in corporate and investment banking, and 32 per cent overall.
Last month, he projected 'quite disappointing' fourth-quarter results, slated for release Jan 22. Analysts on average expect profits to fall more than 80 per cent.
Bank of America did not specify where or in what lines of business the cuts would appear. The bank is based in Charlotte, North Carolina, but houses much of its investment bank in New York. It said the cuts would not affect its plans to occupy a new tower it is building near Times Square in New York.
Brian Moynihan, head of the corporate and investment bank, said in the briefing the bank is selling the prime brokerage because the 'return attributes ... are not so strong'. Bank of America employs about 220,000 people overall, including at the former LaSalle Bank Corp, which it acquired in October for US$21 billion (S$30.2 billion) from ABN AMRO Holding NV.
Mr Lewis admitted that his bank, and most of the industry, had misjudged the risks associated with complex securities.
'Correlations broke down that had never broken down before,' he said. Referring to Goldman Sachs Group , which late last year made a winning bet that market turmoil was coming, he said, 'Nobody that competed in the business escaped it, maybe other than Goldman, which made a big bet and won.'
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