Aug. 4 (Bloomberg) -- Bank of America Corp., under pressure to overhaul management and reduce risk, set up a five-person competition to replace Kenneth Lewis as chief executive officer.

The bank yesterday shuffled senior management and paid $33 million to settle U.S. claims it misled investors while buying Merrill Lynch & Co. Liam McGee, who headed consumer banking, left and was replaced by Brian Moynihan in a division that has provided most of the Charlotte, North Carolina-based bank’s revenue and profit.

Moynihan, 49, who ran wealth management and corporate and investment banking, is the top CEO candidate, according to analysts including Richard Bove of Rochdale Securities. Possible successors include ex-Citigroup Inc. executive Sallie Krawcheck, hired yesterday to head wealth management, home-lending chief Barbara Desoer and Chief Financial Officer Joe Price. Also in the running is Tom Montag, a Goldman Sachs Group Inc. veteran.

“Brian is in a bull’s-eye position,” said Nancy Bush, an independent bank analyst in Annandale, New Jersey. “After he’s run consumer banking, he will have run the bank’s three major businesses, and no one else can make that statement.”

The Merrill acquisition, capstone of Lewis’s $120 billion of purchases since he became CEO in 2001, led shareholders to strip his chairman’s title and sparked a congressional investigation. The bank, which has had three CEOs since 1973, hasn’t previously disclosed succession plans, said Marion Ellis, a Charlotte author who wrote a history of the company.

The new post is Moynihan’s fourth job since December 2008. He’s worked as head of corporate and investment banking, general counsel and most recently, head of both investment banking and wealth management. He joined the bank through the 2004 acquisition of Fleet Boston Financial Corp.

‘Most Powerful’

“The person who runs the retail bank is the most powerful person at Bank of America after Ken Lewis,” Bove said in a Bloomberg TV interview.

Lewis said in a statement the management shuffle and succession plan reflects a need for “new talent” and “new perspectives.” Bank officials have declined to discuss the specific role regulators are playing as pressure from outside forces changes, investor Mike Holland said.

Bank of America rose 53 cents to $15.32 in regular New York Stock Exchange composite trading yesterday, its highest closing price of the year. It has declined 54 percent in the past year.

“The board is not ignoring the public outcry,” said Holland, who oversees more than $4 billion at Holland & Co. LLC. “Ken Lewis is unfortunately caught in a series of occurrences, many of which weren’t at his undertaking, but the board decided it had to do something.”

Exodus From Board

An order issued earlier this year by federal regulators required an overhaul of risk-management and succession strategies, prompting the exodus of nine directors and addition of four board members with banking and regulatory experience. The bank has sold $45 billion in preferred shares through the U.S. Treasury’s Troubled Asset Relief Program.

“They are doing some window-dressing to impress regulators for that day when they can get out from under the memorandum of understanding,” said Gary Austin, founder of PDR Advisors LLC, a Charlotte fixed-income firm that manages more than $450 million, including Bank of America bonds. “But the key question is who has the experience and ability to run the largest bank in the United States.”

Krawcheck, 44, stepped down in September as head of the Smith Barney brokerage and stock-analysis department. She joined Citigroup from Sanford C. Bernstein & Co. in October 2002 as head of Smith Barney. After rising to chief financial officer, she was returned in 2007 to her previous role of overseeing the wealth management-businesses, including Smith Barney.

‘Positive Direction’

“She’s not seen as someone who is going to unify the Merrill Lynch sales force and lead it in a new, positive direction,” Bush said. Krawcheck didn’t return phone calls seeking comment.

Montag, 52, joined Merrill in August 2008 after more than two decades at Goldman Sachs. He was under John Thain, a former colleague who left Goldman Sachs to head the New York Stock Exchange in 2004 and became Merrill’s CEO in December 2007.

Price, 47, joined Bank of America in 1993 and became CFO in 2007. Desoer, 56, moved to California last year to lead the mortgage unit after the July 2008 purchase of Countrywide Financial Corp. She was with California’s BankAmerica Corp. before its 1998 acquisition by NationsBank Corp.

Fears that an internal succession battle will cause rifts within the bank underestimate Lewis’s leadership skills, said Larry Carroll, president of Carroll Financial Associates Inc. in Charlotte, which manages more than $1 billion. “There is a difference between positive competition and infighting and I suspect Ken knows how to keep this reined in.”

Bank of America said David Darnell, head of global commercial banking, will join Lewis’s executive management team. Others remaining on that team include Steele Alphin, chief administrative officer, Greg Curl, chief risk officer, and Anne Finucane, chief marketing officer.

To contact the reporter on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.net

Last Updated: August 4, 2009 00:00 EDT