Wachovia Corporation: Managing Less Profitable Lines of Business Before A Looming Recession

Abstract

 This case describes a situation in which a vice president at a major bank must decide what to do with a line of business that is not meeting the firm’s standard of profitability. Several alternate scenarios are proposed and sensitivity analyses are performed for selected scenarios. The reader is asked to propose additional possible actions to manage this line of business, evaluate each scenario for viability, and decide upon the best course of action. Special considerations in the context of automobile financing include the probability of default, the quantification of risk, and the firm’s culture. The reader has knowledge unknown to the manager at the time of this real-life situation: the booming economy will soon enter a major recession.