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New Business Model for Bank of America

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Can you provide a proposed new business model for Bank of America?

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Solution Summary

The solution provides guidance on how to develop a new business model and provides perspectives on developing the model.

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Guidance on developing business model for Bank of America
To develop a new business model, there is a need for analyzing the company's existing competitive position in the market and the business model that the company is following at present and accordingly, the company needs to devise a new business model through identification of the weaknesses with the existing business model and the opportunities that are existing in the market.
For this purpose, it is essential to analyze the financials and present competitive position of Bank of America

Financials of Bank of America
The major financial facts of Bank of America reveal that:
1) There has been a marginal increase of 0.2 billion in the net interest income as the bank reported a net interest income of $41.79 billion in 2012 which increased to $41.99 billion in 2016 (MarketWatch, 2016).
2) The non-interest income of the bank has increased marginally from $39.77 billion in 2012 to $42.03 billion in 2016 (MarketWatch, 2016).
3) Despite of the marginal increase in the net interest income of 0.48% and non-interest income of 5.68% from 2012 to 2016, the net income of the bank rose substantially by more than 327% during this period (MarketWatch, 2016).
4) The bank has reduced its total interest expenses from $15.61 billion in 2012 to $9.12 billion and the non-interest expense also declined substantially from $72.33 billion in 2012 to $54.18 billion (MarketWatch, 2016). These financials depict that there is a decline of 41.57% of interest expense and 25% of non-interest expense for Bank of America from 2012 to 2016.

Present Competitive position of Bank of America
Bank of America is the market leader in the deposit assets market but is lagging behind in automobile loans market where the company is at the fifth position whereas in home loans market, the bank is at the fourth position. This is evident from the following facts:
1) Bank of America has market leadership position in United States of America with a market share of 10.73% followed by JP Morgan Chase with 10.29% market share, followed by Wells Fargo Bank and Citibank with respective market shares of 10.20% and 4.39% (Comoreanu, 2017: Feb. 9).
2) Bank of America is at the third position with $1,683 billion in total assets and 10.50% market share wherein the market leader is JP Morgan Chase with assets of $2,249 billion and 14.04% of the total banking assets (Comoreanu, 2017: Feb. 9).
3) The leader in Automobile loans market is Ally Financial with $64.8 billion loans being provided in third quarter of 2016 and a 5.9% market share followed by JP Morgan whereas Bank of America was at fifth position with 3.5% market share (Trefis Team, 2016: Nov. 11).
4) In housing loans market too, Bank of America lags behind and is at the fourth position. This is due to the non-banking lenders such as Quicken Home Loans and Caliber Home loans who have gained a stronger market share and are ahead of Bank of America which is at fourth position with grant ...

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  • BCom, M.D.S University, Ajmer
  • MBA, M.D.S University, Ajmer
  • PhD, Suresh Gyan Vihar University, Jaipur
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