News
THE BofA EFFECT
September 14, 2011
| Bank of America announced this week that it's nearing the end of a comprehensive review. Result: around 30,000 jobs slashed, management reorg, consumer biz streamlining, and an annual net expense reduction of $5B by ‘13. What does it mean for CRE? |
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| Overall, BofA has a “very solid branch network—probably one of the best in the country,†according to Proctor Wong, who leads Newmark Knight Frank's bank services group. If branches close, he doesn't believe execs will close ones that are profitableand where the bank has significant market share (NY and California). Rather, it may look at tertiary markets where it lacks scale. Possibilities: an infill takeover of empty branches by other banks or regional portfolio sales of branches. NYU Schack professor Larry Longua also notes that 30,000 employees out of 288,000 isn't a big number spread over a couple of years and 5,700 retail branches. |
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| We've been in situations where bank branches have closed before, says Larry (right, with Proctor). Predictions said branches would disappear to Internet banking, but losses were followed by a cyclical uptick in openings. Most of BofA's current issues come from prior acquisitions of MBNA, Merrill Lynch, and Countrywide—which left not only a foreclosure overhang, but litigation tied to Countrywide mortgage originations. “Whenever you acquire a large financial institution, there's a lot of redundancy that isn't purged immediately,†says Proctor. |
