Bloodbath coming at Bank of America?

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Things are looking baaad for Bank of America bankers in Europe. Kenneth Lewis has indicated his intention to cut $7bn in costs from the combined B of A and Merrill Lynch operations by 2012. According to the calculations of the esteemed Henry Blodget, that means firing 20,000 people. Given that the average Merrill Lynch employee earned $248k last year, our calculations suggest layoffs could be even more substantial - if cost savings are to come from headcount reductions alone, 28,000 people could go.

Fortunately, person elimination isn't the only method of cutting costs. And fortunately for Merrill Lynch bankers, most of the blood looks set to be spilt at Bank of America rather than Merrill.

"Our merger team is talking about the combined company, not just Merrill and not just Bank of America. "We will be looking at both to identify efficiencies," Kenneth Lewis reportedly said during yesterday's conference call.

The combined investment banking operations of the two companies are expected to be led by two Merrill men - Greg Fleming and Thomas Montag. B of A people, who are typically considered lower calibre than Merrill bankers (especially in Europe), may fall foul of the efficiency drive.

Bank of America's wealth managers are most at risk in the US. In Europe, its structured credit, leveraged finance, and rates and FX teams are on shaky ground.

Merrill bankers might be favoured for the moment. But whether they'll want to stick with Bank of America when (and if) markets improve is questionable. "Bank of America is notorious for paying big guaranteed bonuses to get people on board and then paying very little once the guarantees run out," says one headhunter. "A lot of people have left as a result."

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