As they struggle to survive and thrive in the years since the financial crisis, banks have taken to streamlining operations in an effort to reduce expenses. Not that there is anything wrong with that. Some of the nation's biggest banks got fat during the days leading up to the crisis, and needed some strict dieting. But five years after the crash, I'm starting to wonder if all the reducing won't soon leave investors with an empty plate -- and banks with no clear plan in regards to filling it up again.
Cost-cutting widespread among big banks
As far as austerity programs go, the prize goes to Bank of America Corp (NYSE:BAC)
. Chief Brian Moynihan's Project New BAC has been a model of cost reduction since its unveiling in the fall of 2011, when he announced planned cuts of $5 billion by the end of this year. By Nov. 2012, Moynihan noted that the bank had sold off $60 billion in non-core assets, allowing it to pad capital reserves by $12 billion. Recently, B of A has done even more trimming, selling off more big blocks of mortgage-servicing rights
The effects of this strategy showed up nicely in the bank's recent fourth-quarter report, at least as far as capital reserves are concerned. B of A now sports a Basel III Tier 1 common capital ratio of 9.25%, up from 8.97% in the third quarter.
Other big banks are nipping and tucking as well. Citigroup Inc. (NYSE:C)
, which went through some painful management changes in the latter part of last year, announced some 11,000 layoffs in December. Those savings won't be realized until sometime this year, keeping approximately an extra $1 billion per year on Citi's books.
Morgan Stanley (NYSE:MS)
has also scaled back on staff, finishing 2012 with 10% fewer workers than it had the previous year, and plans to cut another 1,600 this year. The bank has cut its compensation expenses even further, doling out bonuses that were 7.6% smaller last year than they were in 2011. They weren't the only ones skimping on these payouts: JPMorgan Chase (NYSE:JPM)
and Goldman Sachs (NYSE:GS)
both cut their compensation back as well, while Goldman has also cut back its workforce by 5% since the latter part of 2011.
Regional banks haven't been immune to the slenderizing craze, either. At about the same time that Moynihan announced his Project New BAC, PNC Financial Services (NYSE:PNC)
unveiled its own pruning plan, which it predicted would reduce expenses by $550 million in 2012. With the company's acquisition of Royal Bank of Canada (TSE:RY)
U.S. operations, the bank is planning further cuts to streamline that new unit. BB&T (NYSE:BBT)
also instituted an expense-containment plan in the latter part of 2011, as it faced declining revenue from loans.