Bank of America Tries to Cut Its Way Out of a Hole

NEW YORK (TheStreet) -- Brian Moynihan is trying to control what he can.

The Bank of America (BAC) CEO is putting his own team more firmly in control, with two key firings on Tuesday of executives inherited from former CEO Ken Lewis, and also taking major steps to cut the company's expenses, through the charmingly-branded "Project New BAC."

Bank of America CEO Brian Moynihan is in a cuttin' mood.

With no way to gauge his company's ultimate losses from the mortgage mess, including the Federal Housing Finance Agency's massive lawsuits against Bank of America and 16 other mortgage lenders announced on Friday, focusing on improving operating efficiency and cutting costs is an obvious move for Moynihan.

The CEO said on Tuesday that "de-layering and simplifying at the scale in which we operate requires difficult decisions," and that "only by streamlining and focusing our resources behind our customers will we truly deliver on the promise of what we have built."

Investors had a positive response during early trading on Wednesday morning, with Bank of America's shares rising

Even before Tuesday's firings and Moynihan's comments on expense reductions, Richard Staite of Atlantic Equities estimated that Bank of America's noninterest expenses would decline significantly. From total noninterest expenses of $83.1 billion in 2010 and an estimated $78.6 billion for 2011, Staite projected that Bank of America's noninterest expenses would decline to $69 billion in 2012 and $68.5 billion in 2013.

Staite reiterated his neutral rating for Bank of America in the September 1 report, with a $9 price target, saying he expects the bank "will remain under pressure for at least the next two years while it continues to deal with mortgage related problems and uncertainty regarding its capital position," adding that although much of the bank's problems are "already discounted by the share price... the outlook remains volatile and a capital raise remains possible."

Meanwhile, Staite has "Overweight" or "Buy" ratings on Wells Fargo (WFC) and JPMorgan Chase (JPM), saying that both companies "will benefit from flight to quality effects and will gain market share in a continued difficult operating environment."

For Wells Fargo, Staite has a $32 price target. From noninterest expenses totaling $50.5 billion in 2010, the analyst estimated that Wells Fargo's noninterest expenses would total $49.6 billion for all of 2011, declining further to $46.9 billion in 2012 and $46.5 billion in 2013.