Acknowledging that it has become bloated and inefficient, Bank of America Corp. said yesterday that it will fire as many as 10,000 employees.
The reduction will begin Monday, although the process is expected to take about a year to complete.
The nation's largest banking company will eliminate 6.6 percent of its work force, mainly middle- and senior-level managers.
The company expects to save up to $600 million a year from the cuts, and it expects to take a $300 million to $350 million charge in the third quarter, primarily to cover severance costs. It did not disclose details of severance packages that it will offer employees, who were told yesterday of the pending cuts.
"We've assembled the right parts, but after years of additions, our resulting structure is neither as efficient nor as effective as it needs to be," said Hugh L. McColl Jr., chairman and chief executive of the Charlotte, N.C.-based company. "We're going to fix it in order to take advantage of our revenue opportunities."
The company had 150,854 employees at the end of last month and $673 billion in assets. It operates in 21 states and Washington, employing 4,197 full-time workers in Maryland, 1,633 in Baltimore.
Bob Stickler, a Bank of America spokesman, said he did not know whether managers in Maryland will lose their jobs. "There is no focus on any one unit or any one geographic area," he said.
Shares of Bank of America closed at $46.50, down 25 cents.
Bank of America is the combination of NationsBank Corp. and San Francisco-based BankAmerica Corp., which stunned the banking industry in April 1998 when they agreed to merge, creating a coast-to-coast colossus.
NationsBank acquired troubled Baltimore-based MNC Financial Inc. in 1993, and eliminated more than 1,000 employees.
McColl, who built NationsBank with one giant acquisition after another, said yesterday that the deal-making is done, and that it is time to focus on performance.
"To date, despite our many successes in individual businesses, we have not made the degree of progress we would like toward realizing that potential," he said.
Analysts were divided over the significance of Bank of America's decision to cut its workforce.
"They are just battening down the hatches," said Joan T. Goodman, a banking analyst at a Chicago-based division of Donaldson Lufkin & Jenrette.
She said that the company is neither as efficient nor as profitable as some competitors. In addition, problem loans have picked up, and its net interest margin - how much a bank makes on loans and investments after interest payments to depositors and creditors - has been shrinking.
"It is a big, big retail bank and there is just competition coming from all over, including the brokerage houses." Goodman said.
But David M. West, a bank analyst at Richmond-based Davenport & Co., said he expected the layoffs because the company has been hinting that expenses were too high, and that the business needed to be restructured.
"I think this is the natural flow of things," he said.
He said that analysts have questioned why job cuts weren't made soon after the NationsBank-BankAmerica merger.
"That West Coast franchise is so huge and so valuable I just don't think they wanted to go in there with an ax ... and alienate a lot of customers," he said. "They wanted to get things right ... and do that in a kinder, gentler way."
Stickler, the Bank of America spokesman, said the cuts have nothing to do with consolidating West Coast operations.
"This is a product of dozens of mergers going back 12 to 15 years," he said. "The structure that was built as a result of that is not an optimum structure going forward. We are able to take a blank piece of paper saying, 'What should this company look like?'"
Company executives said that money saved from the job cuts will be reinvested. An additional $70 million will be pumped into e-commerce initiatives over the next six months; 10 private banking offices will be opened; an additional $25 million will be invested this year for brand development; and the company will speed development of investment banking operations.
By cutting layers of management, top executives will have more direct responsibility for customer service. The company plans to overhaul its structure so that consumer banking transactions are easier and faster.
"Our challenge now is to shape the organization, taking full advantage of what we've created in order to deliver superior value for our customers and shareholders," said Kenneth D. Lewis, president and chief operating officer of Bank of America. "Today's initiatives are a good start."