Bank of America’s investment bank has lobbied hard to win Wall Street’s respect. Now, it is lowering its head in retreat.

Bank of America announced a shake-up of its investment bank last night, cutting 3,000 jobs and installing Brian T. Moynihan as its fourth leader in fewer than seven years.

The announcement followed a terrible third quarter in which the investment banking unit’s profit dropped 93 percent after virtually every area performed poorly.

The shake-up was a significant setback for Kenneth D. Lewis, Bank of America’s no-nonsense chairman and chief executive who has clamored for the gravitas of Wall Street’s more-established players. He said last week that the company’s performance amid the credit market turbulence was “not acceptable” and announced a review of its investment banking operations.

Part of the move will include the early retirement of R. Eugene Taylor, a gentleman banker who led the division since 2005 and spent 38 years at the company. The changes will leave in place most of the management team that guided the unit through this summer’s market turbulence.

The company replaced Christopher C. Hentemann as head of structured products on Friday, naming George Ellison to the post. His boss, Thomas G. White, was named head of capital markets after Mark Werner left in June, shortly before the markets soured. No other changes are expected.

The shake-up will result in the loss of 3,000 jobs, with the bulk coming from the bank’s global corporate and investment banking business. That is less than 5 percent of the work force of that division, the company said. Most of the layoffs are in commercial banking, treasury services and back-office groups, and will be spread nationwide. However, investment bankers and traders, based largely in New York and Charlotte, N.C., are not immune.

“In light of the change in markets and growth prospects, the company is downsizing some positions,” Mr. Moynihan, 48, said in a brief interview last night. “It’s a broad group, but it is preparing us for the slowdown ahead in the economy.”

Mr. Moynihan, who until yesterday ran the bank’s global wealth management division, is leading the review of the investment bank, but drew few conclusions.

He said that it would continue to support its commercial customers as well as its hedge fund and private equity clients, which have become a mainstay of its business. It would also look at businesses like the packaging of loans and financial instruments.

However, Mr. Moynihan did not address the prospects of proprietary trading and fixed-income operations, which were responsible for most of the third quarter’s losses. Executives said there were no plans for more layoffs, but said it was unclear if there would be other rounds after the review. The findings are expected before the end of the year.

Keith Banks, 51, who runs the Columbia Management mutual fund arm, will succeed Mr. Moyihan as the head of wealth management. Mr. Taylor, who Equilar says will leave with a $35 million exit package, will stay on until the end of the year.

In Mr. Moynihan, Bank of America is installing a seasoned manager who brought a steady hand to the integration of U.S. Trust this year. While smart and a straight shooter, he he lacks the polish and pizazz of Wall Street’s established chieftains.

Mr. Moynihan has quickly moved up Bank of America’s corporate ranks, overseeing its strategy, commercial lending and treasury functions before taking charge of wealth management. But he has never run a capital markets unit.

Mr. Moynihan said his responsibility was to “get the right talent on the field.”

“Was I a trader? No,” he said. “More importantly, we have the right people leading the businesses and doing the right things.”

Bank of America, itself a product of a string of several big deals to create a retail bank that stretched from coast to coast, has long desired to be an investment banking power. As it brushes up against a federal deposit cap, that has become an increasingly important goal because it needs to find growth opportunities outside of consumer banking.

But like its Charlotte crosstown rival Wachovia, it has struggled to build a Wall Street franchise from scratch. It has has had trouble attracting and retaining star bankers. It has been roiled by top management turnover.

And though it has gained traction with many of its corporate clients, Bank of America still is overshadowed by more established, global players. Bank of America’s dismal investment banking performance in the third quarter was only the latest in a series of troubles.

Profit plummeted to $100 million from $1.43 billion a year ago, leading to a 32 percent drop in earnings and raising questions about risk management.

Nearly all of its fixed-income operations sharply declined, including a $607 million blow from bad trading bets and a $527 million loss from its packaging mortgage bonds, leveraged loans and other asset-backed securities.

Last week, Mr. Lewis said his initial assessment was that his investment bankers did a good job managing its leveraged loan portfolio and avoiding several bad deals. But he was less sanguine about the bank’s trading performance, blaming about two-thirds of its poor results on bad judgment and mistakes. “I’ve had all the fund I can stand in investment banking,” he added.

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By ERIC DASH

Copyright 2007 The New York Times Company

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