This week Bank of America became the latest large bank to announce mass layoffs in an attempt to cut costs and improve profitability. From Dan Fitzpatrick at The Wall Street Journal:
Bank of America Corp. Chief Executive Brian Moynihan announced a $5 billion cost-pruning plan that includes 30,000 job cuts.
Bank of America will cut $5 billion in annual costs by the end of 2013 and slash 30,000 jobs out of its consumer-oriented businesses, part of an important trimming program at the bank. David Benoit has details on The News Hub.
Pulling it off will require the Charlotte, N.C., company's embattled boss to convince skeptical analysts and investors that he is serious about shrinking the nation's largest bank in assets without seriously damaging employee morale.
"Brian is trying to do a balancing act,'' one Bank of America executive said. "Satisfying investors and not scaring the hell out of employees—it's tough to do.''
A lot of financial analysts immediately connected the move to Bank of America's issues with its sinking stock price, massive legal liability stemming from the housing crisis and foreclosure losses, saying the nation's biggest bank by assets was trying to shore up its solvency by cutting costs.
But there are a lot of big banks thought to be on firmer financial footing, including Wells Fargo and PNC, planning to cut costs. It's not hard to understand why; the profitability of the banking sector, particularly retail banking, has been constrained by everything from aggressive new financial regulation to lackluster loan demand and bargain-basement loan rates.
But the bigger concern for customers is going to be how their banks' service and branch convenience will be impacted by cost cutbacks. I don't think you can lay off 18 percent of your workforce, in the case of BoA's plan, without losing a lot of branches and customer support personnel. It may not be noticeable in every area where BoA operates, but it seems likely to me that the plan will result in longer lines at branches and longer drives to reach branches for some customers.
I think as long as those structural factors I mentioned before continue, layoffs and restructuring in the banking industry will be inevitable. That said, some customers will feel it more than others. If your reason for banking with a particular institution is branch convenience, as it is for a lot of people, and a bunch of branches around you close, you're probably going to want to move on. However, if something like above-average deposit rates or high-tech tools are your reason for being with a particular bank, you'll probably be fine.
What do you think? Will bank layoffs mean a decline in the quality or convenience of bank service? Would such a decline cause you to switch banks?