Bank of America to cut 7,500 jobs after Countrywide deal closes
By E. Scott Reckard, Los Angeles Times Staff Writer
June 27, 2008

Bank of America Corp. said today that it planned to slash 7,500 jobs over two years as a result of its acquisition of Countrywide Financial Corp., which is scheduled to close next week.

"The reductions will take place throughout the country," Bank of America said in a news release. "Final decisions on all specific associate groups and locations have not been made." A spokesman for the bank declined to elaborate.

The combined companies currently employ about 60,000 people in their overlapping mortgage, home-equity and insurance businesses, so the reductions amount to about 12.5% of the workforce.

Countrywide, the nation's largest mortgage lender, had 61,586 employees of its own one year ago, when its work force numbers peaked. At the time, the company had been aggressively hiring top managers from rivals that were folding up shops as the mortgage meltdown took hold.

Following a series of aggressive layoffs, Countrywide had cut its work force to 50,169 as of February, when it stopped reporting employment numbers.

Cuts in duplicate support staff typically follow bank mergers. Charlotte, N.C.-based Bank of America, the country's largest retail bank, plans to complete its acquisition of Calabasas-based Countrywide on Tuesday -- the first day of the third quarter. Countrywide shareholders voted Wednesday to approve the deal.

Pink slips will begin going out during the third quarter, the bank said.

Bank of America Chairman Ken Lewis has said repeatedly that he wanted to purchase Countrywide because of its superior technical systems and employees. The bank's release also noted that it has said it "expects substantial cost savings" as a result of the takeover.

Bank of America agreed in January to buy the troubled mortgage lender, which had lost $1.6 billion during the second half of 2007. Countrywide shareholders were to be given stock that was then worth about $4 billion. As loan defaults and other setbacks have hammered financial companies, Bank of America's stock price has declined and the offer currently is worth about $2.8 billion in stock.

Eligible workers who lose their jobs will be offered severance packages, the bank said, adding that it would work with state and local officials to help the fired employee find new jobs or retraining programs.

Bank of America is likely to shut down some Countrywide "bank" offices, which handle certificates of deposit but few other banking services, and which overlap with Bank of America's branch network, said Frederick Cannon, an analyst at Keefe, Bruyette & Woods.

It was unclear how that would play out, since the Countrywide Bank retail operations typically are housed under the same roof as Countrywide Home Loan offices, with just a desk or two for the bank employees.

"I would expect large cuts in loan originations too," Cannon said, the result of Bank of America's intent to focus on "plain vanilla" mortgage lending with tight standards. On the other hand, he noted, some parts of the business may grow.

Countrywide is the No. 1 player in the business of loan servicing -- the process of billing, passing on payments to loan investors, handling delinquencies and foreclosures, and trying to work with struggling borrowers to avoid having to seize their property.

"They will likely have to staff up in servicing due to growing levels of problem loans," Cannon said.

Shares of Bank of America sank $1.80 to $24.81. Countrywide dropped 16 cents to $4.42.

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