Today's Top Stories Also Noted: Spotlight On... Bank of America's new strategy chief News From the Fierce Network:
Today's Top News1. Bank of America to cut 16,000 jobs
Project New BAC contemplated 30,000 job cuts by the end of 2013 to cut expenses at Bank of America by $5 billion a year. To make sure it hits its goals, Bank of America has plans to accelerate the planned cuts by getting rid of 16,000 jobs this year. As Reuters notes, "The job cuts would put the second-largest U.S. bank a year ahead of schedule in eliminating 30,000 jobs under a program called Project New BAC. The job cuts could shrink the bank's workforce below that of rivals JPMorgan Chase & Co. and Wells Fargo & Co." As of the end of the second quarter, cost savings from the first phase of the project were running at an annual pace of $970 million, behind the goal. So management apparently felt the need to get back on schedule in a big way, hence a leak to the WSJ. Whether this continues to push the stock price higher remains to be seen. Bank of America is hardly the only bank cutting jobs right now, as virtually all remain in slash mode. The moves have helped buoy stock prices, that's for sure. For more: Read more about: Bank of America, jobs 2. Jamie Dimon: The once and future banking industry leader
So who is the next great leader of the banking industry? Until the financial crisis hit home, the Big Cheese was Goldman Sachs CEO Lloyd Blankfein. He gave up the scepter once the bank's legal and PR woes threatened to consume it, giving rise to an esteemed successor: Jamie Dimon, CEO of JPMorgan Chase. Dimon reigned for several years, building his influence impressively, but it all came crashing down once the London Whale Trade fiasco hit home, to the tune of $5.8 billion over two quarters (and counting). His outer layer of Teflon was quickly skinned off, leaving people to wonder who the next leader will be. This issue is more consequential than a mere parlor game. Bloomberg quotes one executive who says that, "The banks have no moral authority at the moment. Jamie Dimon had it, but that's done. The government is piling on the banks. They're just being hammered, and it doesn't help our economy. Somebody has to fight the damn thing." Indeed, the industry would be better off with a public face, to debate regulators at a minimum. But who? I can't see the CEOs of Bank of America, Citigroup, Morgan Stanley, or Wells Fargo stepping up. My sense is that it will be about a year before Jamie Dimon steps back up to re-acquire the mantle. If he can put the London Whale behind him, there's no reason why he can't be the face of banking all over again. That said, putting the incident behind him will not be easy. For more: Read more about: banks, Jamie Dimon 3. Analysts: No issues with new Goldman Sachs CFO
One big job facing any CFO of a public company is to keep the stock analysts in the truck. The goal is for no rogues and no sell recommendations. This is achieved by a mix of flattery, encouragement, cajoling and favor-giving in various doses. If analysts' reports are to the liking of the CFO, you can expect good treatment, access to the CEO and so on. If not, you're on the outs. Analysts at this point have every reason to want to get off to a good start with incoming Goldman Sachs CFO Harvey Schmidt, who is replacing David Viniar, who had been the man in charge for as long as the Goldman Sachs stock has traded publicly. There may be some awkwardness as a newcomer feels his way and as analysts adjust. All in all, the new pick has been received well. Barron's quotes CLSA analyst Mike Mayo who says that, "The new CFO has experience in a few areas that can help as CFO, including risk, management, and regulatory committees and functions, though one issue is the CFO's greater background in sales versus risk oversight." Sandler O'Neill analyst Jeffrey Harte was quoted saying that, "What he may lack in treasury management and accounting experience should be more than made up for by the depth and experience of the team supporting him. Importantly, on last night's conference call management stated that no other financial management changes are expected as a result of the transition." Schmidt will no doubt put his stamp on the jobs, and there may some changes in the way the office conducts business with analysts and institutional investors. Hopefully, he'll be the accessible type. For more: Related articles:
Read more about: Goldman Sachs, analysts 4. Another banking fee controversy
Many banks have added a new fee on business customers, a fee that banks have referred to as an "FDIC assessment," reports McClatchy. By using the agency name in charging the fee, "banks mislead customers into thinking that the agency charges depositors for deposit insurance, or that the financial institutions are simply collecting and passing through a government fee." The FDIC has hiked fees on banks, which can be seen as the cost of providing government deposit insurance. Many business accounts are fully insured though an FDIC program that will expire at the end of this year. "Since then, some banks have passed along these costs to unwitting business customers, burying the fees in the footnotes and fine print of fee disclosures that often are unavailable to the general public. The FDIC, a quasi-governmental agency that insures more than $10 trillion in bank deposits, sent a letter July 9 to banks across the nation in response to complaints from businesses about such fees. The letter provided regulatory guidance to the banks and spelled out the regulator's concerns about and expectations for them. Banks can recoup their regulatory costs, but they can't use the FDIC name in doing so." The FDIC argues that since it doesn't charge bank customers fees, banks shouldn't create that impression. Unfortunately, the practice remains widespread. I doubt that this will explode into a full-on scandal, the way Bank of America's debit card fee did. Still, banks would be wise to change the name per the guidance. For more: Read more about: FDIC, fees 5. Bank of America sued for discrimination against disabled
Diversity training for low-level managers is sometimes dismissed as a waste of time. Many employees might argue that they do not have an ounce of prejudice in their body, and are insulted that anyone would think they need such training. But in the case of the Bank of America branch managers who told Daniel Herrmann--who worked in customer service for Merrill Lynch and then Bank of America and survived a car accident that left his right hand arm and leg disabled--that accommodating him "wouldn't be fair to people with two hands," such training would've been helpful. As noted by ABC News, Herrmann has sued the bank, saying that he was fired after being a few minutes late from his lunch break because he couldn't walk fast enough. This was part of a string of incidents that led to the suit. This sort of litigation is maddening in part because it is so unnecessary. Herrmann was not always treated shabbily. He said Merrill Lynch had accommodated his disability, by "providing a left-handed keyboard and "permitting him to pause between calls so he could type the required information into the computer system using just his left hand," according to the suit. "But when Herrmann's job was transferred to Bank of America's customer service department, he said his supervisors no longer allowed him 'to take any time between calls to enter information into the computer system,' which caused him to average three or four calls per hour and precluded his ability to receive bonuses." He needed to handle five calls per hour to get his bonus. His supervisor told him: "Bank of America is not going to do anything for you" and "Bank of America doesn't have ADA rules." Bank of America may fight the charges, but most likely it will settle. Certainly, it needs to ponder how to raise the quality of HR in branches. For more:
Read more about: discrimination, Bias Also NotedSPOTLIGHT ON... Bank of America's new strategy chief Does it mean anything that Bank of America has had three strategy chiefs in three years? No one doubts that it's a tough job. Perhaps Anne Walker, formerly the chief of Americas equity syndicate at Bank of America Merrill Lynch, will be able to make a lasting contribution. What a funky job it is. She will report to the CFO, and her direct reports include the investor relations director. It's interesting that the bank would combine strategy and investor relations. Perhaps some of this out of the box thinking is exactly what the stock price needs. Article Company News: And Finally…Wal-mart stops selling Kindles. Article
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Friday, September 21, 2012
| 09.21.12 | Bank of America to cut 16,000 jobs
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