Bank of America's Cost-Cutting Plans a Reflection of Banking Industry's Woes

Sept. 23, 2012— -- It may not be a happy holiday holiday season for thousands of Bank of America employees. The bank could be cutting 16,000 jobs by the end of December, accelerating the 30,000 layoffs it had previously said would take a "few years."

The Wall Street Journal reported a document provided to top management that described the details of the 16,000 job cuts, which would leave 260,000 in the remaining headcount, the lowest number since 2008.

After closing 178 bank branches last year, the bank is also planning to close 200 branches this year, a person familiar with the matter told the Journal.

Last September, Bank of America announced a cost-cutting plan that would include reducing 30,000 jobs, the biggest layoff announcement last year by a company, according to outplacement firm Challenger Gray & Christmas.

"As the decisions are implemented, employment levels in the areas under review during Phase I are expected to be reduced by approximately 30,000 jobs over the next few years," the bank said in a statement at the time.

Jerome Dubrowski, a spokesman for Bank of America, declined to comment on published reports about the company's cost-cutting plans and the number of jobs the company has reduced so far.

Shares of the company closed down 0.82 percent to $9.11 on Friday.

If the bank is accelerating its planned job cuts or slimming down operations, that would actually reflect a healthy business move as opposed to a sign of a troubled company, said Anthony Polini, an analyst for investment firm Raymond James.

Even with the possible job cuts and branch closures, the bank will still be considered the largest retail bank, Polini said, with a strong presence coast-to-coast.

"The company is doing great," Polini said. "It's in another phase of expense control."

Polini said the environment of low-interest rates (the Federal Reserve has committed to keeping the federal funds rate near zero at least until 2015), has negatively affected banking profitability.

Regulatory issues have also affected banks' costs, Polini said. The capital requirement burden, with banks required to have higher capital ratios as a result of the financial crisis, has also been a "burden" for banks, he said.

Polini said the closure of bank branches is likely to persist in the industry as more customers bank online and on smartphones.

"There is no country more overbanked than the U.S.," Polini said. "I don't know what you see more of in New York City: Starbucks or bank branches."