CHICAGO, Sept. 12, 2011 /PRNewswire/ -- Zacks.com
announces the list of stocks featured in the Analyst Blog. Every
day the Zacks Equity Research analysts discuss the latest news and
events impacting stocks and the financial markets. Stocks recently
featured in the blog include: Bank of America Corp. (NYSE:
BAC), Bank of New York Mellon Corp (NYSE:BK), State
Street Corp. (NYSE:STT), JPMorgan Chase & Co.'s
(NYSE: JPM) and Dendreon Corporation (Nasdaq: DNDN).
(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)
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Here are highlights from Friday's Analyst Blog:
BofA to Layoff 40,000 Workers
Bank of America Corp. (NYSE: BAC) is mulling over
retrenching 40,000 workers under the first phase of a proposed
restructuring program to recover its financial position, the
Wall Street Journal reported following communication with
people familiar with the plans. The looming layoff scenario does
not come as a surprise from a company fraught with a $1 trillion problem-loan portfolio. The ongoing
economic and market instability has compounded the quandary.
According to the report, BofA officials have already discussed
the layoffs and chief executive Brian
Moynihan is expected to work out the move on Monday. The
number of layoffs could change following discussions with the
CEO.
However, according to the source, the upcoming job cuts could
exceed 30,000 to 35,000 layoffs that the company had in 2008 when
the economy was at the height of recession and BofA was in the
process of taking over Merrill Lynch.
Last month, BofA had announced plans to axe 3,500 workers this
quarter. Thousands of additional layoffs were expected to ensue in
the upcoming quarters, but the expected number of about 10,000 was
substantially lower than the figure now feared.
BoA was one of the biggest victims of the 2007 housing bubble.
Its share price has plummeted about 85% since then. Despite taking
several restructuring initiatives, the company has still not been
able to come out of the crisis.
Moreover, the lawsuit filed by the U.S. Federal Housing Finance
Agency (FHFA) on September 2, 2011
for infringing commitments on the quality of mortgage securities
sold to Fannie Mae and Freddie Mac is expected to severely impact
BofA's financials in the upcoming quarters. At such a crucial
moment of fluctuating world economy, a compensation of billions
would make it difficult for BofA to gain ground any time soon.
However, the company has been relentlessly trying to realign its
balance sheet in accordance with the regulatory changes post
meltdown to remain afloat. In fact, BofA remains committed to shed
its non-core assets, even after repaying the bailout money it had
taken as part of its participation in the Troubled Asset Relief
Program.
Primarily, the company has been selling non-core assets to
strengthen its capital position to reinstate dividend hike, meet
new international capital standards, focus on corporate borrowers
and U.S. retail clients as well as strengthen investment
banking.
BofA is looking to concentrate more on businesses that directly
serve customers as well as strengthen its balance sheet. We do not
see an end to this non-core divestiture in the recent future. With
BofA's plan to boost dividend in the second half of 2011 being
turned down by the Federal Reserve in March, the company sees this
as a way to improve capital strength and fortify its balance
sheet.
Besides, earlier this week, the company announced an immediate
reshuffling of its top management, including the departure of two
executives. The reorganization aligns the company's operating units
according to its key customer groups -- individuals, companies and
institutional investors.
The management reshuffling is part of BofA's cost-cutting
program called Project New BAC, which it started in April 2011. The latest actions are part of the
first phase of New BAC. The bank intends to implement more changes
with the second phase beginning October and running through
March 2012.
The whole intention behind this streamlining move is to remove a
layer of operations management, aligning leaders with the company's
customer groups and simplifying the role and structure of the
management team. According to Moynihan, de-layering and simplifying
at the scale in which the company operates requires tricky
decisions.
The company is significantly optimistic about the success of its
management reshuffling. We, however, don't think BofA will be able
to overcome all its concerns with the management reshuffling at
least in the near to medium term.
Nevertheless, the company is making every effort to save its own
skin. It is initiating several actions to remain afloat. The job
cut initiative explains BofA's attempt to improve profitability
amid revenue headwinds due to a weak economy and stricter capital
requirements by regulators.
Notably, BofA is not the only institution doing this dirty job
of rendering so many jobless. Among other U.S. banks, last month,
Bank of New York Mellon Corp (NYSE: BK) said that it will
slash about 1,500 jobs, which represents about 3% of its total
workforce. State Street Corp. (NYSE: STT) also plans to let
go 850 technology jobs through layoffs and outsourcing.
While the layoff story is doing rounds once again, raising the
recession alarm and spreading panic among the corporate clan, some
good news came from another banking giant, earlier this week. The
investment banking Chief Executive of JPMorgan Chase &
Co.'s (NYSE: JPM) said that the company has no plans to
retrench employees in the near future.
Overall, until revenue generation revives, a hideous
cost-to-income ratio will continue to force many more banks to
reduce costs through job cuts as they need to maximize profits in
order to boost capital ratios. If an industry behemoth like BofA
embarks on such ruthless execution, we wonder what job cut schemes
the other weakly performing firms have in store. We keep an eye on
those…
Dendreon to Cut 500 Jobs
Dendreon Corporation (Nasdaq: DNDN) recently announced
that it will lay off 500 employees tantamount to roughly a quarter
of its workforce as part of a drastic restructuring plan. The plan
was announced to reduce spending to cope with disappointing sales
of its prostate cancer vaccine Provenge. Dendreon also announced
the departure of its chief operating officer Hans Bishop.
Last month, Dendreon reported weaker-than-expected second
quarter sales of Provenge. Subsequently, the company withdrew its
revenue guidance for the drug, sending its share price down
sharply. In August 2011, Dendreon
reported modest Provenge gross revenue of approximately
$22 million. August sales were
however 15% above the sales recorded in the preceding month.
Despite the favorable reimbursement environment for Provenge
following the final CMS decision and implementation of the Q-code,
management believes most physicians are still unaware of these
developments. Moreover, due to the short duration of therapy (about
4-6 weeks) the full costs associated with Provenge have to be paid
out by the physicians within a month and thereafter they have to
wait/hope for reimbursement. These physicians were thus not
comfortable with the cost density of Provenge and did not freely
prescribe the drug. Management lacks visibility on when the doctors
will become more comfortable with the positive reimbursement
developments as well as the cost density of Provenge. The company
now expects modest sequential revenue growth in the remaining
quarters of 2011.
Dendreon has received approval to manufacture Provenge at three
facilities: New Jersey,
Los Angeles and Atlanta. It had hired employees at these
facilities well in advance in order to keep the manufacturing
process smooth in the hope that Provenge will prove to be a hit
among doctors. However, with Provenge sales failing to meet exalted
expectations, management now feels that it is significantly
overstaffed resulting in the inevitable workforce reduction. The
largest share of the layoffs will thus be manufacturing
related.
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