December 19, 2008
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News: Giant B-of-A Must Trim A Little More off the Tree.
Having grown so huge in a short time, behemoth Bank of America, must take off a few pounds or, at least, get in shape. After acquiring the Delaware-based credit card giant MBNA Corp. back in 2005, BoA rose to be the largest credit card bank. Acquisition has been BoA's best suit for many years now causing a dramatic increase in size. Can an institution that builds an empire so quickly also manage it as well? It seems so but, what about extreme surprises? When the world economy under-goes a Richter-9 earthquake suddenly, can such a giant financial institution exercise sufficient agility to stay balanced? Indications so far look good but the tremors are far from over. Credit card upheaval has become a troubling aftershock for the entire industry and some of its giants are teetering.
One strong point in BoA's favor is its diversification. They're not only the leaders of the credit card industry but also: Deposits; Mortgages and; soon-to-be, Wealth Management. Though not without it's problems, BoA has some diversified hedging to afford them some wiggle-room. Their wise balance allows for some shifting without falling over. Right now, they're having to shore up a lame appendage called ‘credit card lending'. The other three legs are strong enough to take over the load while it heals.
With an outlay portfolio of over 70 million credit card customers, a little trimming can go a long way. When BoA acquired Florida's Barnett Bank and announced they would have to reduce staff because, as then-CEO, Hugh McColl, worded it "We just have too many good employees." The Orlando Sentinel quickly moved on this remark by interviewing the ‘un-named' competing CEO who responded with "That doesn't make sense. No company can have too many good employees. We sure don't." There-in, lies the difference. Now, again, because of the extremely down-turned economy, they must shed a few more good employees. Credit card losses are near the top of the list of concerns of investors and analysts. Specifics in layoffs are shy but it's been hinted that 30,000 will leave as 60,000 more are added when Merrill Lynch & Co joins the team soon. The reduction would represent about 11% of the giant's good employees.