Bank of America will focus on containing risks and costs and won't add much staff in coming months. Chief Executive Brian Moynihan says any global investment banking hires will be mainly attritional replacements and won't greatly impact expenses.
Asked during Friday's second-quarter earnings conference call whether BofA plans substantial overseas hiring as rival JPMorgan is doing, Moynihan said future hires "will not have a huge impact" on global banking expenses. "We're replacing some people we lost and adding a few people," he said, estimating new hires would only be in the hundreds.
The bank had a tough quarter, with overall net income dropping 3 percent while global banking and markets net income fell to $6.0 billion from $9.75 billion in the first quarter.
Trading Profits Plummet, But IB Income Edged Higher
As with JPMorgan's results, the revenue decline stemmed from trading. BofA's trading profit shriveled to $1.2 billion, softest in more than a year, from the first quarter's very strong $5.07 billion. Fixed income, equities, currencies and commodities all saw revenue declines. Meanwhile, investment banking income rose to $1.3 billion from $1.2 billion in the first quarter.
BofA execs said their bankers were told to steer clear of the ongoing European sovereign crisis, which meant less trading profits but also less risk exposure.
New CFO Charles Noski also sounded a conservative note, saying his priorities include:
- Focusing on returns, "not absolute size";
- BofA's core businesses (located mainly in the U.S.)
- Strong expense management, which would put a damper on any substantial hiring increases.
"We're not going to get diverted into other activities," Noski says.
BofA does not disclose staffing by division. Overall headcount was stagnant, with 283,224 employees compared with 283,320 in the first quarter, and 282,973 a year ago. Compensation and benefits expense fell to $8.7 million in the quarter compared with $9.1 million in the first quarter.
That said, BofA isn't signalling any substantial cuts in staff either. Asked whether last quarter's decline in sales and trading revenue would prompt layoffs, Moynihan said he looks at trading as a quarter-by-quarter business (noting the first quarter was stronger) and is comfortable with the year-to-date numbers. "We're well aware of headwinds we're going to face," he said.