"Do more with less" Bank of America lays off employees to point the way for cost management in the banking industry

Big U.S. banks have received a clear message in recent days: Runaway spending won't stop.

Banks such as JPMorgan Chase, Goldman Sachs and First Republic Bank, which reported higher-than-expected costs, were hit hard, while Bank of America, on the other hand, showed another way to manage costs amid rising inflation, a war of talent and soaring technology spending.

"Bank of America stands in stark contrast to JPMorgan Chase," Wells Fargo analyst Mike Mayo said in a telephone interview. They "spend less and do more".

Bank of America CEO Brian Moynihan attributed the superior level of fees over his peers to a reduction in the number of employees — and a reduction in the amount of paper checks processed. The company is one of the few large banks with fewer employees in the fourth quarter. Wells Fargo has also cut its workforce, but it is also grappling with the Fed's growth restrictions.

While Bank of America expects to start adding its workforce again this year, the bank still expects spending to remain unchanged. New Chief Financial Officer Alastair Borthwick said the falling costs associated with the pandemic and the spread of digital applications for customers will help offset the increase in other expenses.

Mayo said the rise in wages has affected the banking sector as a whole. He downgraded the bank for the first time in seven years after JPMorgan's fourth-quarter results, which it announced on Friday, showed a sharp rise in spending.

Since the start of the earnings quarter, the benchmark KBW Bank Index has fallen 5.6%. JPMorgan Chase and First Republic Bank were at the bottom, both falling more than 10 percent. Still, Mayo said bank stocks still have room to rise because an expected Fed rate hike would boost banking profits regardless of how spending changes.

In addition, the banking sector reported loan growth last quarter and now says it is likely to accelerate, which adds to the bullish rationale.

"Retail banking is back," Mayo said, calling the fourth quarter a "huge turning point."

This article originated from the financial world