updated 10/1/2009 7:31:49 PM ET 2009-10-01T23:31:49

The CEO who succeeds the departing Ken Lewis at Bank of America Corp. will have plenty of repair work to do, including mending relationships with regulators and investors after the animosity that followed the acquisition of Merrill Lynch & Co. this past year.

Banking analysts don't have a strong consensus about who will become CEO when the embattled Lewis leaves Dec. 31. The Bank of America executive mentioned most often is Brian Moynihan, who heads the company's largest division, consumer and small business banking. But analysts say former CEOs of banks including Wachovia Corp. could also be candidates.

The new CEO faces some daunting tasks. He or she must juggle regulatory investigations into the Merrill acquisition, including federal and state demands for information about the billions of dollars in bonuses paid to Merrill employees just before the acquisition was sealed. The bank also needs to return to a good relationship with those regulators and improve its standing with members of Congress who have sharply criticized Lewis and the bank for much of the nine months since the Merrill deal closed.

"In this regulatory environment, the government has to be your partner, not your adversary," said Sydney Finkelstein, a professor of management at Tuck School of Business at Dartmouth.

The bank under Lewis has fought the Securities and Exchange Commission and New York attorney general, who have charged that Bank of America officials misled shareholders about the Merrill acquisition, including the bonus payments.

The new CEO also has to find a way to repay $45 billion in government bailout funds so it can operate without the restrictions, including limits on executive pay, that come along with the money.

"Whomever (the CEO) is will be tasked to get the company out from underneath the heel of the federal government," said Gary Townsend, president of private investment group Hill-Townsend Capital Inc. "That is the No. 1 priority."

Getting the money to repay those loans in the coming months might be difficult because of the rising loan losses that Bank of America, like banks across the country, is contending with.

Bank of America will be "bumping along the edge of profitability the next few quarters," said Jefferson Harralson, an analyst at Keefe, Bruyette & Woods Inc. Analysts polled by Thomson Reuters are forecasting the bank will post narrow losses in the third and fourth quarters.

Bank of America set aside $13.4 billion for loan losses during the second quarter, compared with $5.8 billion a year ago. The company reports its third-quarter earnings on Oct. 16.

The new CEO must resolve the legal and regulatory problems that grew out of the Merrill deal. Bank of America had reached a settlement with the SEC of charges that it failed to tell shareholders that it authorized Merrill to pay up to $5.8 billion in employee bonuses. The company agreed to pay the government $33 million without admitting wrongdoing to settle the case, only to have a federal judge reject the agreement. The company faces a Feb. 1 start of a trial on those charges.

Meanwhile, New York Attorney General Andrew Cuomo is expected to file charges related to bonuses against the bank and several high-ranking officials.

Lewis' departure clearly came as a surprise to the Bank of America board, given that there was no clear succession plan in place. Lewis, 62, had said he would remain as CEO until the bank cleared up its financial problems, but it appeared that he had had enough of the conflict surrounding the bank over the past year and decided to announce his retirement now. The bank issued a statement late Wednesday saying he would leave by Dec. 31.

Bank of America could be considering hiring a temporary CEO that would stay for about two years before naming a long-term replacement, according to a Wall Street Journal report Thursday that cited anonymous sources.

Bank spokesman Robert Stickler responded to the report saying, "nothing is off the table" in terms of potential hiring options, leaving open the possibility the bank could hire someone on a short-term basis.

KBW's Harralson said Bank of America might be considering an interim CEO because some candidates might not want to work for the company for more than a few years. The timing of Lewis' retirement might have caught the bank off guard, forcing the board to move quicker than expected, Harralson said.

The list of possible successors is long and includes internal candidates like Moynihan; Sallie Krawcheck, the head of global wealth and investment management and Tom Montag, who heads global banking and markets. Analysts said possible external candidates include former Wachovia CEO Robert Steel; Al de Molina a former Bank of America chief financial officer who's now CEO of GMAC Financial Services and Richard Kovacevich, the chairman of Wells Fargo & Co. There's also Bill Winters, who just left JPMorgan Chase in a management shakeup.

There's no consensus on who might be the best pick, or whether the CEO should be an insider.

"Bank of America has a long culture of success and bringing an outsider could harm the morale and performance of the organization," Rochdale Securities analyst Richard Bove said.

Bove said Moynihan is probably the leading inside candidate because he heads its largest division.

Some shareholders, including those who called earlier this year for Lewis' ouster and a shakeup of the board, are likely to oppose a current executive as CEO.

Michael Garland, director of value strategies for CtW Investment Group, said none of the internal candidates has the ability to repair relationships with regulators. CtW is a minority shareholder and campaigned against Lewis before the annual meeting in April. At the meeting, shareholders voted to strip Lewis of his chairman's role, leaving him as the CEO.

Some analysts said an outside candidate could give the bank a fresh perspective.

Tony Plath, a finance professor at the University of North Carolina at Charlotte, said Montag, who joined the company from Merrill Lynch, has the international experience to help the bank with a potential global expansion.

Krawcheck joined the bank only recently as head of global wealth and investment management, yet her name pops up among discussions to replace Lewis as well. She previously ran Citigroup's retail brokerage business.

De Molina could provide a compromise for investors looking for an outside source, while satisfying those who want someone familiar with the bank. He has been at GMAC for more than a year after working 17 years at Bank of America.

Steel was CEO of Wachovia for a short time before it was sold to Wells Fargo & Co. after spending most of his career at Goldman Sachs Group Inc.

Credit Sights analyst David Hendler said Winters, who was a co-CEO at JPMorgan Chase's investment bank, has a strong reputation in that sector but lacks the experience on the consumer banking side that is Bank of America's biggest operations.

Kovacevich, who is also a former Wells Fargo CEO, announced last week he'd retire at the end of the year having reached the bank's mandatory retirement age of 65.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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