Bank of America Corporation (BAC - Free Report) , the second largest U.S. lender by assets, is set to reduce its workforce in order to achieve greater efficiency. BofA is contemplating nearly 411 layoffs in its troubled mortgage servicing unit.
The layoffs are a part of the company’s Project New BAC, which aims at revamping the overall business scenario at BofA. Under this initiative, the company plans to cut nearly $8 billion in annual costs and 30,000 jobs. Therefore, in order to achieve its target, BofA has planned to eliminate 324 jobs in Richardson and 87 jobs in Dallas. However, the laid off employees will be provided career-transition resources along with severance pay and benefits.
The mortgage servicing unit, which was initiated in 2011 to service delinquent and risky mortgages, suffered a setback due to the decline in loan portfolios triggered by the financial crisis. Owing to this, the loan portfolios decreased from 1.6 million to 667,000. This lessened the demand for workforce as fewer employees were required to service those accounts.
Earlier in Apr 2013, BofA closed its mortgage servicing office near Buffalo, N.Y, which resulted nearly 1,320 job cuts in that unit. It also eliminated about 469 jobs in Newark, N.J.
BofA previously eliminated jobs in the last two quarters. It slashed nearly 4,378 jobs in the first quarter of 2013 and around 5,400 jobs in the fourth quarter of 2012. The company had 262,812 employees as of Mar 31, 2013, a decline of 5.7% from the year-ago period.
The job cuts do not come as a surprise since many other global firms have resorted to the same strategy over the last few years. The ongoing economic crisis, market instability and weakening revenue resources have prompted the company to downsize its operations and reduce workforce in order to improve its overall competence.
Other companies that have resorted to job eliminations over the past several quarters include Morgan Stanley (MS - Free Report) , JPMorgan Chase & Co. (JPM - Free Report) and Citigroup, Inc. (C - Free Report) .
BofA currently carries a Zacks Rank #3 (Hold).