Bank of America announced Wednesday it will eliminate about 3,000 jobs and begin a strategic review of its investment banking unit, the profit of which plummeted 93% in Q3. The cuts will be mostly from that unit, which employs about 20,000 people, and will affect less than 2% of the bank's overall workforce. In a surprise move, CEO Ken Lewis is forcing out Gene Taylor, head of Global Corporate and Investment Banking and "a longtime ally and close friend," according to the WSJ. Taylor will be replaced by Brian Moynihan, who was head of the bank's Global Wealth and Investment Management business. Last Thursday, the bank reported a 32% drop in Q3 profit. Net income fell to $3.7 billion ($0.82/share) from $5.42 billion ($1.18) a year ago, and revenue was down 12% to $16.3 billion. The investment banking unit suffered approximately $4 billion in trading losses, defaults and writedowns over the quarter, attributed by Lewis in part to the roiling credit markets and in part to the bank's mistakes. "I've had all of the fun I can stand in investment banking at the moment," Lewis said after the report. "So to get bigger in it is not something I really want to do." "Ken Lewis was clearly disappointed by the performance and the bank's risk management," said KBW Inc. analyst Jefferson Harralson. "He is moving quickly to boost earnings for next year." The strategic review of the division is expected to be completed by early 2008.
Commentary: Bank of America Drops on Earnings Miss • Bank of America: Disappointing Earnings, But Could Be Worse • Bank of America's Miss Indicates Broader Economic Woes
Stocks to watch: BAC. Competitors: C, WB, WFC. ETFs: FDL, IYG, KBE, RKH
Competitors: Bank of America Q3 2007
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