Bank of America Corp (BAC) to Cut 3,000 Jobs, Shutter Offices

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Bank of America Corp (NYSE:BAC) (Analyst Report) continues to streamline its business with the recent disclosure of plans to downsize further. Bank of America intends to close three foreign offices, which will lead to reduction of nearly 3,000 jobs within a year.

These branches are a part BA Continuum, a non-bank subsidiary of Bank of America Corp (NYSE:BAC). Nevertheless, the Indian counterpart will remain unaffected by the ongoing business operation review.

The offices to be shuttered are technology and operation sites that support San Jose, Costa Rica; Guadalajara, Mexico and Taguig City, Philippines. These offered services to various divisions of Bank of America Corp (NYSE:BAC) including the mortgage and insurance business.

Some of the services offered by the branches will be transferred to other units of Bank of America in the long run. However, the bank’s latest move clearly reflects its intention to reduce its mortgage business.

In the initial phases of economic recovery, banking giants like Bank of America Corp (NYSE:BAC) capitalized on the low interest rates to boost the mortgage lending business. However, with recovery in the housing market, the price of real estates is on the rise. Moreover, with initiation of the Fed tapering, interest rates are expected to rise as well.

Hence, now investors have to buy costlier properties with loans that have higher rates of interest. This has consequently dragged the demand for mortgage loans. In the past few quarters, banks in the U.S. including Bank of America Corp (NYSE:BAC), Citigroup Inc (NYSE:C) (Analyst Report), JPMorgan Chase & Co. (NYSE:JPM) (Analyst Report) and Wells Fargo & Co (NYSE:WFC) (Analyst Report) have witnessed weak performances in their respective mortgage banking businesses.

In the present economic scenario that offers limited scope for top-line growth, major banks like Bank of America Corp (NYSE:BAC) are resorting to aggressive cost cuts to maintain profitability. Therefore, the company’s latest move to do away with units that support a relatively unprofitable business seems justified.

At present, BofA has a Zacks Rank #4 (Sell).

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