Key Notes
- BAC shares fell as much as 8.3% in early trading after the bank disclosed a settlement charge and weaker quarterly trading results.
- The $1.2 billion regulatory charge reduced reported earnings by $0.17 a share, while adjusted EPS of $1.08 missed the $1.10 forecast.
- Lending income and wealth-management revenue grew, partly offsetting a 5% decline in sales and trading revenue.
Bank of America Corp. (NYSE: BAC) shares fell as much as 8.3% on October 14 as investors absorbed a $1.2 billion regulatory settlement charge and quarterly trading results that fell short of expectations.
The stock reached a session low of $49.50 against Tuesday’s $53.96 close, according to CNBC’s quote page. It subsequently traded near $49.94 at 13:46 UTC, still about 7.5% lower. Those figures describe the early session, rather than a closing return.
The selloff followed the enforcement action we reported on Tuesday. Wednesday’s earnings release showed how the penalty affected profit, while weaker capital-markets revenue gave shareholders another concern beyond the compliance case.
The Fine Cuts Reported Earnings by 17 Cents a Share
Bank of America’s earnings release showed third-quarter net income of $6.93 billion, down from $8.33 billion a year earlier. Diluted earnings fell to $0.91 a share from $1.04.
The regulatory settlement charge reduced quarterly earnings by $1.2 billion, or $0.17 a share. Excluding that item, adjusted net income was $8.1 billion and adjusted earnings were $1.08 a share. These are non-GAAP measures that remove the settlement’s effect from the reported results.
The distinction matters when assessing the earnings miss. CNBC reported an LSEG consensus of $1.10 a share, while noting that the reported figure may not be directly comparable. Even the bank’s adjusted $1.08 result was below that benchmark.
Revenue also disappointed. On a fully taxable-equivalent basis, revenue was $30.12 billion against the $30.69 billion LSEG forecast. The bank’s GAAP revenue, net of interest expense, was $29.96 billion. The two revenue measures use different tax treatments and should not be interchanged in the forecast comparison.
Trading Weakness Adds to Pressure on BAC Stock
Sales and trading revenue fell 5% to approximately $5.1 billion. The bank said the decline applied both including and excluding net debit valuation adjustments, which reflect changes in the valuation of certain liabilities.
Fixed-income, currencies and commodities trading revenue declined 17%, with mortgages, municipal securities and credit activity weighing on the business. Excluding the valuation adjustment, the unit generated approximately $2.55 billion.
Equities trading provided a partial offset, rising 10% excluding the adjustment to approximately $2.51 billion. The bank attributed that growth to stronger client-financing activity, particularly in Asia and the United States.
Despite that improvement, the combined trading performance remained weaker. Total company investment-banking fees also declined 11% to $1.8 billion, adding pressure on revenue from its Wall Street businesses.
Within the Global Markets segment, net income fell to approximately $1.24 billion from $1.65 billion a year earlier, while noninterest expenses increased 8%. Lower revenue and higher costs therefore both weighed on the segment’s profitability.
The Regulatory Penalties Total More Than $1.21 Billion
The Treasury Department announced the enforcement actions on October 13. FinCEN assessed a $1.2 billion civil penalty for anti-money-laundering failures, with a $750 million payment to the Office of the Comptroller of the Currency credited against that amount.
The OCC payment is therefore included in the $1.2 billion assessment. A separate Office of Foreign Assets Control settlement of approximately $11.66 million brings the combined amount above $1.21 billion.
Treasury said the bank admitted willful Bank Secrecy Act violations involving its compliance program, foreign correspondent-account due diligence and suspicious-activity reporting. More than $5 billion in suspicious transactions were not reported on time, including over $1 billion linked to national-security-related and other priority risks.
Those figures describe activity requiring investigation and reporting, rather than a finding that every transaction involved criminal proceeds. The enforcement resolution also requires continuing compliance work after the monetary payments.
Lending and Wealth Management Offer a Partial Offset
The quarter was stronger in businesses outside trading. Net interest income increased 8% to $16.45 billion on a GAAP basis, or approximately $16.6 billion on a fully taxable-equivalent basis.
Bank of America cited higher loan and deposit balances, fixed-rate asset repricing and activity in Global Markets as contributors. Average loans and leases reached approximately $1.23 trillion, up 6%, while average deposits increased 2% to $2.02 trillion.
Global Wealth and Investment Management revenue rose 13% to $7.12 billion, and segment net income increased to $1.54 billion from $1.27 billion. Client balances reached approximately $5.1 trillion, supported by higher market valuations and asset-management flows.
Capital Returns Continue as Compliance Work Remains
The bank returned approximately $8.3 billion to shareholders during the quarter, including $6.0 billion in common-stock repurchases and $2.2 billion in dividends. Its standardized common equity tier 1 capital ratio was 10.9%, which the company said remained above its regulatory minimum.
Those figures describe capital distributions already made during the quarter. They do not guarantee the pace of future buybacks, which investors will assess alongside earnings, capital requirements and spending on compliance improvements.
For BAC shareholders, the immediate picture combines a substantial settlement charge with weaker trading revenue, partly offset by growth in lending income and wealth management. The next question is how those operating trends develop while the bank completes the required remedial work.
