Bank of America Corp. has told regulators that it is willing to retreat from some parts of the country if its financial problems deepen, according to people familiar with the situation.

Executives at the Charlotte, N.C., financial giant put the potential move on a list of emergency scenarios submitted to the Federal Reserve last year, these people said. While people close to Bank of America insist that no retreat is imminent, even the possibility of selling branches and losing customers it spent huge sums to lure underscores the depth of its problems.

Among the 7,400 U.S. banks and savings institutions, Bank of America, JPMorgan Chase & Co. and Wells Fargo & Co. are the only coast-to-coast giants. For the past 20 years, Bank of America and predecessor NationsBank Corp. relentlessly acquired other financial institutions in a form of manifest destiny that shook the U.S. banking industry. The 1998 takeover of BankAmerica Corp., of San Francisco, and 2004 purchase of FleetBoston Financial Corp., Boston, left the combined bank with sizable muscle in nearly every large metropolitan area in the country.

Over the course of its long expansion, Bank of America, currently the country's second-largest bank by assets, pushed its way into every nook and cranny of the financial system. But in doing so the bank left itself more exposed than any major bank to the severe economic downturn of 2008-2009, the weak recovery since and a litany of mortgage-related lawsuits.

Bank of America stumbled at a time when the entire U.S. banking industry was going through its worst crisis since the 1930s, prompting a federal bailout of many of the nation's largest financial institutions. Still, some of Bank of America's worst wounds, particularly its 2008 purchase of Countrywide Financial Corp., were self-inflicted.

Its share price has tumbled 55% in the past year, the worst performance of any major U.S. bank. In the third quarter, JPMorgan leapfrogged Bank of America to become the biggest U.S. bank by assets.

Bank of America Chief Executive Brian Moynihan put a possible geographic retrenchment on the list submitted in the middle of last year to Fed officials. Also on the list is a potential sale of a separate class of shares tied to the performance of Merrill Lynch & Co., the securities firm owned by Bank of America, according to people familiar with the matter. Merrill was sinking when Bank of America swooped in to buy the firm in 2008, but has since turned itself around. The Fed, which acts as the company's primary regulator, asked for documentation about contingency plans last year in response to uncertainty about a U.S. recovery and the downward swing in Bank of America's share price.

The drastic moves would be seriously considered only if Bank of America needs to raise more capital to cushion itself from mortgage woes and other turmoil. The exercise wasn't intended to force immediate action but rather to prepare Bank of America if its situation worsened, according to a person familiar with the Fed's approach. But Mr. Moynihan, other top executives and directors of the sprawling bank are grappling with scenarios that were unthinkable even during the worst moments of the financial crisis.

The 52-year-old Mr. Moynihan was promoted to CEO in 2010 to fix a bad situation inherited from predecessor Kenneth D. Lewis, who pushed hard for the Countrywide acquisition. "I see these times as a vindication of our model," Mr. Lewis said in 2007 after announcing the agreement to buy Countrywide. The deal has haunted Bank of America ever since, saddling the company with huge losses and legal woes.

So far, Mr. Moynihan has made progress retooling Bank of America into a leaner and more focused company. That is a shift away from its longstanding emphasis, especially before the financial crisis, on growth.

Mr. Moynihan declined to comment through a bank spokesman.

"We are a less risky, smaller, better capitalized, and more streamlined company since Brian became CEO," the spokesman said. "The progress we have made has not been done without challenges and setbacks, but…we believe will deliver long-term value for shareholders." He added that the bank had shed billions in noncore businesses and assets and reorganized the company and its leadership under Mr. Moynihan.

Financial results due next Thursday are expected to show only a tiny profit at Bank of America for 2011. In addition to its other woes, the bank is being squeezed by an industrywide revenue decline, tougher regulations and rocky financial markets.

The pressure is mounting on Mr. Moynihan, and some directors and executives are frustrated by some of his decisions and recent public-relations gaffes, especially a plan to charge customers $5 per month to make purchases with a debit card, according to people familiar with the matter. Bank of America abandoned the plan after it invoked political fury and became a punch line on late-night talk shows. This week, the company decided to ask advertising agencies to compete for a new campaign designed to improve Bank of America's tarnished brand.

Mr. Moynihan, who joined Bank of America when it bought Fleet, has struggled to convince regulators that he has done enough to steady the bank, which has $2.2 trillion in assets and branches in nearly every state.

The bank still is operating under a secret U.S. sanction known as a memorandum of understanding, which puts the bank under stricter oversight, despite steps taken by Mr. Moynihan to consolidate risk controls and shed assets. Regulators have warned the board that the sanction could escalate to a more formal, public enforcement action if they aren't satisfied with the results of the ongoing shake-up. Bank of America recently submitted a new capital plan to the Fed as part of a new round of banking-industry stress tests.

In his first two years as CEO, Mr. Moynihan sold assets deemed nonessential, wrestled with the mortgage mess and scrambled to shore up Bank of America's balance sheet to help cushion the company from future economic shocks. To cut costs, Bank of America last fall announced 30,000 job cuts, or 10% of its overall work force, and thousands of additional job cuts are expected this year.

Some analysts said Bank of America is likely to shrink the size of its core banking operations no matter what happens to the company's financial situation. The reason: As Bank of America tightens its belt, smaller cities that are less profitable than big ones look increasingly expendable. The company already has signaled that it plans to get rid of 750 of its 5,700 branches in the next few years.

About $60 billion of the bank's roughly $1 trillion in deposits are scattered across 310 geographic areas with a population of less than 500,000 each, according to research firm FIG Partners. "These small, seemingly irrelevant cities could be quite meaningful for another small bank," the firm said in a recent report.

As the troubles pile up, Mr. Moynihan also has been bruised by public-relations stumbles. He hinted publicly that a dividend increase was likely, and then the Fed rejected the company's request. Late last year, Mr. Moynihan backtracked on his vow to investors that Bank of America wouldn't need to issue new shares in order to raise capital.

Before the debit-card retreat, the chief executive privately rejected a suggestion by Joseph Price, Bank of America's consumer-banking chief, that Bank of America take more time to learn whether the fee would work, said people familiar with the discussion. The message was "we are not going to learn anything more" by proceeding slowly, this person added.

A Bank of America spokesman said, "Although Brian approved the reversal of the debit-fee decision, he wasn't at the center of the original decision-making that was done by the business leaders who made the decision."

The bank's openness about the charge was part of a larger push by Mr. Moynihan to ensure greater transparency around fees imposed by the bank.

Bank of America announced the $5-a-month debit-card fee in an employee memo in September but dropped the fee before it was implemented. Mr. Price left the bank in September. He couldn't be reached for comment, and his lawyer wouldn't discuss the incident.

Unlike predecessors Mr. Lewis and Hugh L. McColl Jr., a former Marine who ran the bank for 18 years, Mr. Moynihan has always had a delicate grip on the bank's top job.

Directors picked him after talks with an outside candidate collapsed. The unanimous vote that led to Mr. Moynihan's promotion came after director William P. Boardman, a former Visa International Inc. chairman, changed his "no" vote to keep it from going public, according to people familiar with the situation.

Mr. Boardman, who retired from the board last year, dropped his opposition to Mr. Moynihan because he worried it would damage outside confidence in Bank of America, these people said.

Directors knew from the start that Mr. Moynihan, an Ohio-born lawyer, would have his hands full. Shortly after he joined Bank of America, an internal assessment by the bank concluded that he failed to communicate effectively, didn't include enough people in decisions, tended to micromanage and surrounded himself with people who weren't experienced enough, according to people familiar with the report.

Still, higher-ranking executives thought Mr. Moynihan had great potential, so they tried to coach him, these people said. But after a clash with other executives over the 2007 takeover of private-banking operation U.S. Trust from Charles Schwab Corp., Mr. Moynihan was told again that he needed to be more inclusive, people familiar with the situation said.

Since becoming CEO in January 2010, Mr. Moynihan has made numerous attempts to be more open and seek out advice, according to people close to him. For example, after there was internal criticism about a public appearance for Mr. Moynihan following the financial crisis, the bank sought help for Mr. Moynihan from several executive coaches about how to communicate more effectively.

But some directors and executives became troubled by what they saw as confusion among some of his lieutenants.

Bank of America's finance chief and chief accounting officer learned about the bank's decision to publicly disclose in a securities filing the Fed's denial of the dividend-increase request only when news outlets published headlines, according to people familiar with the situation. Mr. Moynihan approved the filing.

A director who backed the decision to promote Mr. Moynihan to chief executive said his handling of the matter showed a "very inexperienced team dealing with a situation it had never dealt with before."

Given the bank's mammoth size and many challenges, some board members also suggested to Mr. Moynihan that it would be wise of him to name an operations chief, according to people familiar with the discussions. The Bank of America spokesman said Mr. Moynihan had envisioned appointed a chief operating officer since the day he took over as CEO.

In September, Mr. Moynihan installed two executives as co-chief operating officers. One of them, Thomas Montag, had openly sought the CEO job before Mr. Moynihan got it.

Directors also told Mr. Moynihan that they wanted quicker updates about mortgage losses and lawsuits, and the chief executive has tried to keep the board more informed, according to people familiar with the situation.

Mr. Moynihan also took the unusual step of traveling around the U.S. with Charles Holliday Jr., Bank of America's chairman, last summer to ask each director for input about the company's strategy. The CEO is trying to "demonstrate a great partnership with [his] chairman," said one person close to the company.

Another person familiar with the board's recent discussions about Mr. Moynihan said they are working hard to help him improve his performance. "Who else is going to run the ship?" this person said. "That's a dilemma."

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