Bank of America's reported loss this week of $8.8 billion for the second quarter of the year was eye-opening, but not unexpected, and in fact, some experts were predicting losses just slightly worse than the company's 90-cent per share decline.
The losses stem from mortgage-related charges which have put the squeeze on "a very successful bank" in terms of BofA's investment banking, private wealth management and corporate lending businesses, says Richard Lipstein of New York-based recruiter Boyden Associates.
Bank of America already cut about 60 positions in equity sales and trading last month, said a Bloomberg report quoting two people in the know. It would not surprise Lipstein to see more job cuts in sales and trading - both in equities and fixed income given their overall generally depressed conditions.
BofA has also not excelled in providing financial advisory services to the ultra-high net worth families and individuals under its private banking umbrella, sources say.
Moreover, "The overall Wall Street shift towards higher base salaries- with a lower bonus payment at the end of the year-due predominantly to regulatory pressures," could mean bankers could experience layoffs sooner rather than later, says Lipstein.
"If BofA is looking at pruning the lower performers, they may do it now rather than at the end of the year because of this higher fixed compensation cost, the recruiter adds.
That said, BofA's new earnings statement was chock full of good news outside of its mortgage losses which were driven by charges related to the recently announced agreement to resolve nearly all of the legacy Countrywide-issued first-lien non-GSE residential mortgage-backed securitization (RMBS) repurchase exposures, as well as the impact of other mortgage-related costs.
"These charges were partially offset by lower credit costs, gains from the sale of non-core assets and debt securities, improved sales and trading revenues and higher asset management fees and investment banking fees," BofA reported.
For instance, Its Merrill Lynch investment banking unit reported fees of $1.6 billion, a 28 percent increase from a year ago. "This marks the highest investment banking fees since the acquisition of Merrill Lynch," the company reported.
Also, parts of BofA's advisory business are going strong, and this is an area where the company has actually been adding to staff.
"The number of Global Wealth and Investment Management client-facing associates increased for the eighth consecutive quarter, with the company adding 546 Financial Advisors in the quarter and 942 since the second quarter of 2010,' Bank of America reported.
"Referral volumes remained strong during the second quarter with referrals from Global Wealth and Investment Management to Global Commercial Banking up 75 percent from the prior quarter, and referrals from Global Commercial Banking to Global Wealth and Investment Management up 23 percent from the prior quarter," the company added.
Even with the general success in financial advice-giving, Bank of America is reportedly having trouble with its ultra-high net worth business, geared to the very wealthiest families and individuals.
Bank of America Corp. may be willing to sell its U.S. Trust private banking division, the Boston Business Journal reported in May, adding that such a move could raise several billion dollars and ease concerns about its capital levels.
A sale also would ease dissention within Bank of America's global wealth unit, according to the report, which stated that "U.S. Trust bankers sometimes find themselves at odds with a much larger and more aggressive Merrill Lynch operation, which generated more than five times as much revenue in the first quarter.