Bank of America Corporation (BAC) will lay off 51 workers by closing its check-processing center in St. Louis. According to a Worker Adjustment and Retraining Notification filed with the Missouri Department of Economic Development, the retrenchment will take place by Oct 2, 2009.
As the use of debit cards and online banking has increased significantly in the recent years and customers now write fewer checks, BofA is trying to consolidate its check-processing operations nationwide.
BofA is the second-largest bank in the St. Louis area with $7.9 billion in deposits. BofA’s banking and non-banking subsidiaries across the United States and in other international markets provide a diverse range of banking and non-banking financial services and products.
We, however, think that Bank of America is in a relatively good shape from a capital perspective. During this delicate period of market stress, the availability of significant private-sector capital is very limited. As a result, the management remains focused on managing asset levels efficiently, ensuring the deployment of Troubled Asset Relief Program (TARP) funds in core lending businesses and trimming other assets in non-core businesses.
We think that the management is quite confident about its capital position as it has indicated paying back TARP funds in installments.
We anticipate continued synergies from the company’s large scale operation and balance sheet restructuring, but higher credit costs and worsening credit quality will be a drag on upcoming results. Therefore, we are recommending the shares as Neutral.
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