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Bank of America's Merrill Lynch businesses -- including retail brokerage and investment banking -- were profitable but did not make enough money to overcome the bank's massive losses from mortgages.

As the financial crisis was ramping up, then Chief Executive Kenneth Lewis bought Countrywide Financial Inc for $4.2 billion. Current CEO Brian Moynihan is still coping with the aftermath.

In the fourth quarter, the bank took a writedown of $2 billion to recognize the declining value of Countrywide. The bank also set aside $4.1 billion for legal costs linked to home loans it is buying back from investors, or is likely to buy back.

"Countrywide is still hurting them and it will continue to. It's like a tooth being pulled -- it's only going to feel good when it's done," said Matt McCormick, portfolio manager at Bahl & Gaynor Investment Counsel Inc in Cincinnati, which does not own Bank of America shares.

Bank of America's home loan business has lost more than $12 billion since the beginning of 2009. Chief Financial Officer Charles Noski said on a conference call that the bank may have to set aside another $7 billion to $10 billion to cover legal settlements with mortgage investors.

CEO Moynihan, speaking on financial news network CNBC, said the U.S. housing market would continue to bump along the bottom, and the banking industry would be dealing with related problems for years to come.

Mortgages are hurting the bank, but financial regulation could also weigh on future results, bank officials said. Noski said a new law limiting the fees that big banks can charge merchants for processing debit card transactions could cost Bank of America about $1 billion of revenue starting in the second half of 2011.

The bank has suffered from its Countrywide purchase, but its acquisition of Merrill Lynch has helped. Bank of America's global banking and markets unit, combined with its global wealth and investment management arm, which includes Merrill Lynch's investment bank operations and retail brokerage, earned $1.06 billion in the fourth quarter.

"Merrill worked out much better than you would have thought," said Mike Holland, founder of Holland & Co, which oversees more than $4 billion of assets.

Bank of America shares were up 0.3 percent to $14.58 in early trading.

CHARGES WEIGH

The fourth quarter was the second straight to include large one-time charges for the bank, and pushed it to a second straight quarterly loss after two consecutive quarterly profits for first-year CEO Moynihan.

In the third quarter, the bank reported a $10 billion writedown of its cards business due to new curbs on debit card fees banks can charge merchants.

Moynihan is trying to turn around a bank cobbled together by Lewis primarily through acquisitions over the last decade. Moynihan is a former FleetBoston executive, a bank that BofA bought in 2003.