In 2011, BofA was the subject of criticism and scrutiny. With reports of quarterly negative net income and a 48% decline in stock price, BofA faced a strategic challenge that threatened its survival. To deal with its high exposure to mortgage-related losses and lawsuits, and the slow recovery of the U.S economy, BofA was forced to make multiple changes to its organization in order to cover soaring costs and disproportional revenues, while also attempting to maintain customer and shareholder confidence.
In an effort to stabilize profitability, BofA's recovery plan, called “Project New BAC”, proposes aggressive cost cutting, divesture of non-core assets, and generation of new capital through private investment, and sales of its correspondent mortgage lending platform.
In order for BofA to regain its health and defend its strategic position, we propose three long and short-term recommendations that can help to stabilize BofA's profits and salvage its mortgage lending investment by absorbing its losses.