Bank of America still has an issue with people leaving
After announcing its fourth quarter results last week, Bank of America is due to announce its bonuses next week and when it does, there may be disappointment. Bank of America could benefit from disappointing a few people; they won't leave.
Speaking to investors on Friday, Bank of America CEO Brian Moynihan said he thought the bank's turnover rate was just 6% in the fourth quarter of 2023, half its usual rate of 12% and below the 7% average for the full year. The turnover rate is "very low," Moynihan observed.
The low turnover rate might be due to the pleasures of working for Bank of America, which has been investing in its markets business and says it's been gaining share in investment banking. However, it may also derive from a lack of alternative job opportunities and a semi-craven clinging to current roles. BofA isn't the only place to have a problem: Morgan Stanley and KPMG have complained of the phenomenon too.
Moynihan didn't pontificate on the reason for employees' increased willingness to keep working for Bank of America. Nor did he say it was a bad thing. However, it was the low turnover rate that encouraged BofA to implement a semi-hiring freeze this time last year and as the turnover rate remains low, the implication is that this will remain in place.
Instead of filling vacancies with people hired externally, Moynihan said last week that BofA has been "rolling over teammates from one business to another business" and "retraining people and reskilling people." AI could enable more of this redeployment in 2024, he added. Last year, M&A bankers in quiet markets who were used to working on big deals were encouraged to work with middle market clients instead.
Despite its hiring freeze and internal redeployments, BofA has still been hiring quite busily. In 2023 Moynihan said 15,000 people were recruited across all business areas. This, however, coincided with a headcount reduction of nearly 5,000 people as the bank went from 218,000 employees in January '23 to 212,900 in December.
If 15,260 people left (7% of 281k) and 15,000 people were hired, the implication is that BofA also actively cut 5,000 people last year. CFO Alastair Borthwick nontheless said the cuts were achieved through "attrition" and that BofA managed to avoid paying "an outsized severance charge."
Could BofA benefit from more attrition in 2024? Maybe not right now. Borthwick said the presumption is that last year's markets revenues are a new normal and Moynihan said there's a "full pipeline" of investment banking deals that should soon take the bank back to $1.5bn in revenues even if there's a lack of clarity on when those deals will be done.
And if costs need to be cut? Moynihan said they can keep managing costs down by omitting to hire replacements for people who leave. This being so, it might still help if a few more people left in the first place.
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