By Joe Rauch
CHARLOTTE, North Carolina (Reuters) - Bank of America Corp
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On Tuesday, the largest U.S. bank is hosting its first investor day since 2007, a year before the financial crisis peaked and two major acquisitions -- Countrywide Financial Inc and Merrill Lynch & Co -- reshaped the bank.
After 14 months on the job, analysts and investors said Moynihan, 51, is facing one of his biggest tests since taking over for Kenneth Lewis in January 2010.
"This is the beginning of where the rubber meets the road for Brian," said Marty Mosby, bank analyst with Guggenheim Securities LLC.
Moynihan must lay out a clear plan for how a bank that has traditionally grown by buying rivals can now grow on its own, adapt to new regulations and return to consistent profits, investors and analysts said.
A company spokesman said the investor day is part of an "ongoing conversation" with investors about the business and where management sees opportunities for growth.
The first challenge, investors said, is consistent profits and reining in mortgage-related losses.
In 2010, Bank of America reported its second straight annual loss for common shareholders, losing $3.59 billion.
That loss followed a $2.2 billion shareholder loss in 2009, and is a far cry from the $21.1 billion profit the bank reported in 2006.
The result has been a sagging stock price as the industry overall surged.
The bank's stock dropped 11.4 percent in 2010, while the KBW Bank Index <.BKX> -- comprised of large and mid-size U.S. banks -- gained 21.6 percent over the year.
The bank's price-to-book ratio lags that of its rivals -- like Wells Fargo & Co
Despite the lackluster results in 2010, few investors and analysts said Moynihan is on the hot seat. Some were even complimentary.
"He's been an improvement over Ken Lewis," said Jonathan Finger, a Houston-based investor whose family firm, Finger Interests Ltd, owns 1.1 million shares.
Finger was an outspoken critic of Lewis, and in 2009 lobbied the company to split the chairman and CEO roles Lewis once occupied.
Finger also notes it is difficult to fully critique Moynihan's time as the bank's top executive because he has had little time to formulate a growth strategy.
"They've been in crisis mode the entire time," Finger said.
In July, U.S. Congress passed the Dodd-Frank Act, overhauling domestic bank regulation.
The legislation includes new rules ranging from limits on debit card fees to curbs on banks taking risk with their own capital. The changes cut into the bank's revenue estimates, and forced billions in writedowns of some of its major operating divisions.
Last year's loss was driven by a $10 billion writedown of the value of its cards business in the third quarter, due to the expected reductions in debit card fee revenue.
In the fourth quarter, the bank also recorded more than $6 billion of mortgage-linked writedowns.
Longer-term, analysts said, Moynihan must prove that an all-encompassing financial conglomerate can work.
BofA was formed with a series of acquisitions over decades, culminating in two purchases during the financial crisis which have had radically different results.
The acquisitions of Countrywide in July 2008 for $4.1 billion in stock and Merrill Lynch for $19 billion in January 2009 made Bank of America the largest U.S. mortgage servicer, an enormous U.S. brokerage and one of the biggest Wall Street investment banks in less than a year's time.
BofA has inherited billions in mortgage-related losses as a result of the Countrywide buyout.
Meanwhile, the businesses BofA bought from Merrill Lynch have been growing.
BofA's investment banking operation -- known as global banking and markets -- reported net income of $6.3 billion for 2010, and posted the largest profit among the bank's six major divisions.
The wealth management division, which includes all of Merrill Lynch's brokerage force, posted $1.3 billion in net income.
HINTS AT THE FUTURE
For his part, Moynihan and his management team have hinted at the bank's future.
BofA's investment and commercial banks have hired aggressively overseas in the last year, particularly in Asia. It has shed what Moynihan considers extraneous businesses and investments.
During the company's fourth quarter earnings call, Moynihan said wealth management would be a key business to expand domestically, as other domestic consumer banking businesses now saturate the United States. The bank does business with one out of every two U.S. households.
"They've continually said 2010 was about building toward the future, but they won't get another year of that kind of leeway from investors," said Tony Plath, banking professor at University of North Carolina at Charlotte. "They're going to have to show results."
(Reporting by Joe Rauch, editing by Matthew Lewis)