Most analysts believed that Bank of America (NYSE: BAC) would cut about 10,000 jobs in its consolidation of operations with Merrill Lynch (NYSE: MER) which it bought earlier in the year. That would be enough people to hit the promised cost saving for putting the two firms together. It is a lot of people out of work, but not a blood bath.
Well, it looks like the blood bath has come and no one appears to have expected it. According to CNBC, "Bank of America could end up cutting 30,000 jobs as it moves to absorb Merrill Lynch, three times as many as previously estimated."
Did Bank of America mislead its employees, the press, and investors? Perhaps, but it may have done so for all of the right reasons. Predictions now are the B of A will lose a lot more money than most observers expected a month ago. It faces huge write-offs in its real estate and consumer credit portfolios. That may mean the firm could be faced with having to raise more money and dilute current shareholders. It could also hurt the bank's chances of maintaining its dividend and current share price level which is already down from a 52-week high of $47 to just above $14.
The new layoffs are not good for the poor people who will be hitting the exits, but the news may add weight to the impression that bank earnings for the current quarter are falling apart fast.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
12-03-2008 @ 2:01PM
Mike O said...
One thing that the market has noticed is that layoffs are being perceived as done out of weakness, rather than strength.
The more layoffs, the worse the company must be doing. In the end, this ends up pushing their stock prices even lower.
12-03-2008 @ 9:33PM
Stock Trader Larry said...
I agree, the current bank earnings must be looking pretty bad. Layoffs are done for cost cutting measures. No company lays off people when they are doing good. When higher than expected layoffs occur, something is up and it is not anything good. The markets though lately, take bad news and are assuming that may be it, how much worse can it get attitude. Ban of America went up over 7% today even with this news. Go figure?