Today, Bank of America (NYSE:BAC) is grabbing a disproportionate amount of attention. News of Bank of America layoffs has led to an impressive surge of nearly 2% in BAC stock. On a one-day basis, that’s a rather large move for this company that tends to see muted price action outside of earnings.
Like many other tech companies that have ratcheted up cost-cutting measures, Bank of America is looking to cut investment banking jobs in specific Asian markets. With overall activity in China and Asia overall slowing, this is a move the bank hopes will bring increased efficiency and improved profits.
Investment banking is a rather cyclical business. When the markets are booming, bankers putting together deals are very busy. However, as we’ve seen recession concerns creep into the conversation, much of this activity seen following the pandemic has slowed.
Let’s dive into what this announcement means for shareholders and why BAC stock is surging today on the news.
Bank of America Layoffs Lead to Stock Price Surge
Layoffs are terrible for almost everyone involved. Employees are forced to look for jobs, and the resulting signals that business is slowing could be taken negatively.
However, these Bank of America layoffs are, once again, being taken positively by investors. Business still remains relatively strong on the whole. And trimming operations in areas that are seeing a slowdown is being viewed as a prudent move for a given company’s bottom line.
It appears the layoffs in China remain relatively small for the time being. Reports suggest around half a dozen jobs in Hong Kong were eliminated yesterday. That said, Bank of America may follow rival Citi’s (NYSE:C) lead in eliminating a greater percentage of its workforce. Citi has reportedly suggested it will lay off around 1% of its global workforce.
Right now, it appears leaner and meaner is being rewarded by investors. Companies that look to reduce low performers and properly compensate high performers are doing better than those who are sitting on their hands. Thus, I expect to see more such headlines in the coming weeks and months as uncertainty reigns supreme.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
