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Bank of America chief had rough first year

It should come as no surprise that Brian Moynihan, CEO of Bank of America Corp., wants to put 2010 behind him.

"Last year was a necessary repair and rebuilding year," Moynihan said Friday. His comments came as the nation's largest bank reported a fourth-quarter loss of $1.6 billion and a full-year loss of $3.6 billion.

In his first year as CEO, Moynihan spent much of his time on the defensive as BofA teetered from one crisis to another. Two of its key businesses were under fire: its credit card unit took a $10.4 billion write-down due to new regulations, and its home loan business struggled with fallout from the implosion of the housing bubble.

Investors weren't impressed with Moynihan's first full year in charge. BofA's stock was the laggard among large banks in the last year. Now in his second year, Moynihan needs to prove he can get the bank back on a growth track as the economy recovers.

The issues facing Bank of America are so varied and deep that some frustrated investors are already giving up.

"It's a hornet's nest of issues that they are dealing with that will be very hard for the bank to overcome in the near term," said Walter Todd, principal at Greenwood Capital Associates. A longtime Bank of America shareholder, Todd's firm had bought additional shares in 2008 at the height of the financial crisis. However, Todd's patience ran out after the stock's 11 percent decline last year and he sold all of the firm's Bank of America shares in December.

Investors are especially worried that regulations enacted after the financial crisis will make it difficult for Bank of America to increase profits and grow many of its businesses, especially its credit and debit card business. The bank has warned that it would lose at least $2 billion in annual revenue for a few years in its card business.

Most of the Charlotte, N.C., bank's problems stem from its 2008 purchase of Countrywide Financial, the country's largest mortgage company at the time. The deep slump in the real estate market has hampered all its competitors, but Bank of America has been at the center of almost every controversy involving bad home loans.

It paid $2.8 billion last month to the government-owned mortgage companies Fannie Mae and Freddie Mac to settle claims the bank sold them defective mortgages. In the fourth quarter, it kept aside $4.1 billion for more bad home loans that it could be forced to buy back from the two government agencies and other investors. It also set aside another $1.5 billion for litigation expenses related to bad mortgages.

"The year 2011 could be another year of continued repair," said Nancy Bush, a banking analyst with NAB Research.

Moynihan is now in charge of a company that's smaller than when he took over. The bank's revenue for the year declined 8 percent to $110 billion. All of its major businesses saw declines. Its credit card loans declined 16 percent to $167 billion, home loans declined 5 percent to $125 billion, and commercial loans fell 11 percent to $195 billion.

Moynihan's challenge will be to grow all these businesses. "We still face the realities of sticky unemployment in this country and a slow and stagnant recovery in housing and modest overall U.S. growth," Moynihan said in a conference call with analysts Friday.

Still, he is optimistic that the bank is in a stronger position and might be able to raise its dividend modestly toward the second half of the year.

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