Bank of America Corp. executives today said massive loan losses that have mauled profits over the past two years appear to have peaked, but they remained cautious about the pace of the nation's economic recovery.

“While things are improving, the U.S. economy remains fragile,” Bank of America chief executive Brian Moynihan said in his first earnings conference call since replacing Ken Lewis as CEO on Jan. 1.

Capping a tumultuous year that included Lewis' early departure, the Charlotte-based bank reported a fourth-quarter loss applicable to common shareholders of $5.2 billion, a figure that included dividends paid to the government and a charge related to the bank's exit from the Troubled Asset Relief Program. The loss more than doubled the $2.4 billion in red ink the bank spilled in the fourth quarter of 2008.

For all of 2009, Bank of America lost $2.2 billion, counting preferred dividends, compared to a gain of $2.6 billion in 2008. Excluding the dividend payments, the bank posted net income of $6.3 billion in 2009, an improvement over the $4 billion it made in 2008.

Bank of America's report came on the same day that San Francisco-based Wells Fargo & Co. said it made $394 million in net income applicable to common shareholders in the fourth quarter, compared to a fourth-quarter loss of about $3 billion last year. For all of 2009, Wells Fargo, which bought Charlotte's Wachovia Corp. at the end of 2008, made about $8 billion in 2009, compared to $2.4 billion in 2008.

On a per share basis, Bank of America's loss of 60 cents per share was slightly worse than analysts had expected. In afternoon trading, the bank's shares were up slightly to $16.33.

Bank of America's purchase of Merrill Lynch & Co. in January 2009 spurred its need for an extra infusion of government aid and a host of investigations and shareholder lawsuits. But Merrill's capital markets and wealth management businesses continued to buoy the bank's results in the fourth quarter. Merrill-related businesses made about $2.8 billion in net income, while consumer businesses, bogged down by bad loans, lost about $1.4 billion.

In addition to a $4 billion charge related to paying back TARP, Bank of America's earnings were clouded by a number of other one-time charges. The bank took an accounting charge of $1.6 billion related to Merrill Lynch structured notes, recorded markdowns of $1.1 billion on troubled securities and posted a gain of $1.2 billion from its investment in money manager BlackRock Inc.

For the third straight quarter, the bank's provision for credit losses – the amount it subtracts from earnings for loan losses – declined, falling to $10.1 billion from $11.7 billion in the third quarter. The bank saw a drop in its net charge-offs, or actual loan losses, as well as in the reserves it set aside for anticipated losses. For all of 2009, the bank took a provision of $48.6 billion, compared to $26.8 billion in 2008.

“It feels to us like we're moving from stability to actual improvement,” chief financial officer Joe Price said in a conference call with analysts, although he, too, remained cautious about the recovery.

Credit cards losses remained a trouble spot, with that unit posting a $1 billion loss after setting aside $6.9 billion to cover loan losses. Commercial and commercial real estate charge-offs dipped slightly to $1.6 billion, but Price warned that the recovery in that area would be “bumpy.” Commercial real estate losses tend to come later in a recession, but Price said potential losses were “manageable” for a company of Bank of America's size.

In his assessment of the economy, Moynihan said the bank expects the U.S. gross domestic product, the primary measure of economic growth, to expand by 3 percent this year. Global growth should be slightly better, he said. Unemployment and the housing market remain concerns, he said.

“It will be several quarters before we're discussing normalized earnings,” Moynihan said.

Asked about any possible strategy shifts under his leadership, Moynihan reiterated his belief in the company's diversified business model. “Don't look for any major changes,” he said.

Moynihan said he inherited a company that doesn't need to add new products and services, but instead needs to focus on execution, balancing the needs of customers, employees and shareholders. At its best, the company can “generate a lot of cash,” he said.

The conference call was Price's last as chief financial officer. He replaces Moynihan as head of consumer and small business banking on Feb. 1. Moynihan said the bank is searching for a CFO from outside the company and would like to make the hire “as soon as possible.”

In his new area, Price will face the challenge of replacing revenue lost from new restrictions on fees and interest rates banks can charge credit card customers and account holders. The bank expects that a new credit card law will have an $800 million impact on the company in 2010, Price said. Changes to the overdraft fees it charges cost it about $160 million in the fourth quarter, but it's still assessing the affect on this year's result, he said.

The bank's total employment increased by nearly 2,000 to 283,717 during the quarter. Price said the increase reflected additional workers assisting with loan modifications and other business-driven needs.

The bank in December 2008 said it planned to eliminate 30,000 to 35,000 employees over three years related to the Merrill purchase and the economy. Price said he didn't know of any specific downsizing initiatives in the works, although he noted business unit leaders are always making adjustments based on business activity. Merrill-related cost savings occurred faster than originally expected last year, and the next round is expected to be tied to computer system conversions at the end of this year, he said. Those will be spread around the country and the world, with no particular concentration in Charlotte, Price said.