BofA (BAC) On Track To Reduce Costs, Lays Off Employees

In order to improve efficiency, Bank of America Corporation (NYSE:BAC) plans to continue cutting costs even after reaching its $53 billion of expense-savings target by 2018. Chief Operating Officer, Thomas K. Montag, said at the Morgan Stanley Financials Conference on Jun 14 that the company is trying to look for innovative and new ways in which technology can replace humans, so as to reduce expenses.

Montag said that the company will look for ways to optimize its business. He added that the firm’s markets risk-management and trading platform is one of the areas which require a huge sum of money to be maintained. If the bank can consolidate these systems, it can reduce costs.

Also, for BofA, technology and operations costs are very high. Thus, in order to reduce these costs, it has already started to lay off employees in its operations and technology division.

The news, which was first reported by the Charlotte Observer, stated that the company cut an undisclosed number of jobs on Wednesday, particularly in its Charlotte headquarters.

Dan Frahm, a BofA spokesperson, said in a statement that the employees who have been fired were notified a day before. However, the company encourages them to apply for other positions available within BofA, which has nearly 600 vacancies in its Charlotte region.

The bank has been continuously trying to improve efficiency by reducing costs. Its expense-saving plan — Project New BAC (launched in 2011) — helped improve overall efficiency and save as much as $8 billion in operating expenses annually till the end of 2014. The same trend continued in 2015 and 2016 too.

Further, the bank is planning to move toward digitalization as an increasing number of people search for off-site banking methods to fulfill their needs. This will also help it control costs.

For example, if it is successful in developing ATM machines which can perform the basic daily needs of customers, then tellers will no longer be needed for these transactions. In fact, tellers can then move from behind the counter and focus on the more complex transactions. This will help reduce payments towards salaries and also improve efficiency.

Apart from BofA, various other companies like JPMorgan Chase & Co. (NYSE:JPM) , The Goldman Sachs Group, Inc. (NYSE:GS) and Morgan Stanley (NYSE:MS) have been engaged in expense-reduction initiatives. Notably, shares of BofA surged nearly 78.5% in the last one year, outperforming the Zacks categorized Banks - Major Regional industry’s rally of 39.6%.



Currently, the stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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