BofA saves considerable cost in Asia, adds staff'

Bank of America Corp (BofA) has made “considerable” cost savings in Asia since its January purchase of Merrill Lynch & Co and has begun adding employees, as rebounding equity markets help halt a revenue drop.

The Charlotte, North Carolina-based bank hired more than 100 workers in the region since March amid signs that trading, stock sales and acquisitions were recovering, said Ki Myung Hong, Asia-Pacific president of Bank of America Merrill Lynch.

“The merger is proceeding at a faster-than-expected pace and we’ve already realised considerable expense savings and started reinvesting in some hires,” Hong said in an interview. “We are already having a very profitable year to date across all the businesses.”

Hong, 51, is trying to rebuild Bank of America’s Asian operations after senior Merrill executives, including former Asia Vice Chairman Sheldon Trainor and Richard Gibb, who headed the financial sponsors group, left following the acquisition. The MSCI Asia-Pacific Index has rallied 32 per cent in the past three months, driving a rebound in trading and spurring more companies to raise capital by selling stock.

Bank of America, Goldman Sachs Group, Credit Suisse Group and Citigroup are among the global banks that fired workers in Asia in the first quarter. Worldwide, more than 320,000 financial-services jobs have been lost since the global credit contagion started in mid-2007.

“As long as this stability continues, I believe most firms will have largely gone through their right-sizing” in Asia, Hong said.

Slow Recovery
Bank of America Merrill Lynch is the fifth-ranked underwriter of equity offerings in Asia-Pacific this year, according to data compiled by Bloomberg. Merrill was fourth in 2008, before the two firms merged. Nomura Holdings of Japan leads the rankings this year.

Companies have sold $47 billion of stock in the region so far in 2009, almost three-quarters of the total for 2008, Bloomberg data show.

Hong said that the industry revenues in Asia have likely “bottomed out” at levels seen in 2005 and 2006. Even so, the recovery may be a slow one, he said.

“There are signals that stability is returning and that this is the bottom, but for the industry as a whole, the bottom may naturally lag for quite some time,” Hong said. “It will be well into 2010 before we can turn around and say we were right about this.”

Senior Departures
Bank of America, which acquired Merrill in the midst of the worst financial crisis since the Great Depression, was forced to eliminate jobs early this year as revenue slumped and after Merrill reported wider-than-expected losses.

The biggest US lender has raised almost all of the $33.9 billion demanded by regulators after last month’s stress tests and now expects to “comfortably exceed” that number, the bank said in a June 3 statement. Bank of America faces the largest capital gap among the 19 lenders stress-tested by US regulators.

Senior Merrill executives also departed. Raymundo Yu, chairman for the Asia-Pacific region, quit in December after 27 years with the bank. His departure was followed by those of Margaret Ren, managing director of China investment banking, and Kalpana Desai, head of mergers and acquisitions in the region, in addition to Trainor and Gibb.

Accelerate Expansion
Bank of America’s cost savings are the result of sharing facilities and offices as well as cutting jobs, said Hong, who was chief risk officer for the Asia-Pacific region until his promotion in February. Hong replaced Nelson Chai, who quit two months after being appointed to the job.

Hong has set up a 24-member executive committee to make sure Bank of America and Merrill Lynch operate as one company in the region. The bank can increase revenue by selling a wider range of services to the existing Bank of America and Merrill clients, he said.

“What we need to do for the rest of the year is to mine existing clients,” he said.

Bank of America also plans to “accelerate” expansion in China including finding a domestic securities partner, Hong said, without elaborating further.

The merged company now has eight key business areas, with the fixed-income and equity sales and trading businesses being the “engine” for profit in Asia, Hong said. Bank of America is also expanding “high-margin” businesses including trading in currencies and commodities, he said.

In May, the bank hired Doug Butcher as head of execution services for Japan, Jim Fallon as director of prime brokerage sales in Hong Kong, and Farokh Pandole as director of India equities sales in Mumbai.

The US bank also hired Junichi Shiroshita as managing director of investment banking in Japan, said Rob Stewart, a Hong Kong-based spokesman.