Bank of America profit falls to $0.91 a share after $1.2 billion fine
On October 14, BoA's adjusted earnings of $1.08 a share missed the $1.10 estimate, and the shares were down 4.1% before the US market open.
Key takeaways
Bank of America (BoA) reported third-quarter profit of $6.9 billion, or $0.91 a share on Wednesday, October 14. This followed an announcement that the US Treasury Department had imposed a $1.2 billion penalty on the bank, the third-largest in the department's history, for failing to meet money-laundering standards. A year earlier, BoA earned $8.3 billion, or $1.04 a share.
The results, released at 6:45 a.m. Eastern, revealed a miss on the earnings figure analysts use, and trading revenue below the guidance the chief executive gave in September.
Leaving out the charge, adjusted earnings were $1.08 a share, two cents under the $1.10 estimate compiled by the London Stock Exchange Group. Adjusted profit was $8.1 billion, still below last year's $8.3 billion.
Falling fees hit BoA bottom line
On September 14, at a Barclays conference, BoA's Chair and chief executive Brian Moynihan said investment-banking fees would fall at least 10%, to between $1.6 billion and $1.8 billion, and that trading revenue would be roughly flat against $5.4 billion a year earlier.
Fees landed in that range, at $1.8 billion, down 11% as sales and trading revenue also fell 5%, to $5.1 billion. The decline was in fixed income, currencies and commodities, down 17% to $2.6 billion. Equities trading rose 11%, to $2.5 billion.
Competitor Citigroup, which reported on Tuesday, went the other way in investment banking and markets. Its investment-banking revenue rose 9%, and its markets revenue rose 6%.
Before the regular session opened at 7:44 a.m. Eastern, BoA shares were indicated at $51.73, down 4.1% from Tuesday's close of $53.96. They had already fallen 1.1% on Tuesday. Investing.com tied the morning drop to the earnings miss.
Revenue was $30 billion, up 3% from a year earlier. Net interest income was $16.4 billion, up 8%. The bank attributed that increase to higher loan and deposit balances, more interest income from its markets business, and the repricing of fixed-rate assets.
"The team delivered organic growth, deepening client relationships and adding new ones," Moynihan said in the release. "While investment banking and sales and trading revenues were lower, commercial lending grew in every client segment."
The provision for credit losses was $1.3 billion, slightly below a year earlier. Net charge-offs were 0.44% of loans, compared with 0.47% a year earlier.
BoA to strengthen transaction oversight
The Financial Crimes Enforcement Network (FinCEN) assessed the $1.2 billion penalty imposed on BoA. Treasury's announcement on Tuesday described that penalty as the third-largest in the department's history. The two larger Treasury penalties were against Binance, the crypto exchange, and TD Bank.
FinCEN said the bank admitted it willfully violated the Bank Secrecy Act, and that it failed to report more than $5 billion in suspicious transactions on time, including more than $1 billion tied to national-security risks.
"As these issues arose, Bank of America prioritized its revenues and minimized the impact on its required compliance resources," the Treasury said.
BoA said it has invested billions in compliance, that the work is far along, and that those costs are already in its expenses. FinCEN's consent order, published Tuesday, requires the bank to work with a third party to identify suspicious transactions it did not report. That order does not set a date for the review to be finished.
"Financial crime compliance is serious, and we are responsible for getting it right," Bank of America spokesperson Christa Robinson said on Tuesday.
The Office of the Comptroller of the Currency has had the bank under a cease-and-desist order since December 2024, separate from Tuesday's consent order. Comptroller Jonathan V. Gould said the bank's "poor response" to its anti-money-laundering deficiencies was "unacceptable."
The earnings documents did not include a new interest-income forecast. Moynihan and chief financial officer Alastair Borthwick are due on an investor call at 8:30 a.m. Eastern. That is the first chance for a new forecast, and for any number on what the review will cost beyond the expenses the bank says it is already carrying.
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Frequently asked questions
Why did Bank of America's quarterly profit fall?
A $1.2 billion charge for the money-laundering penalty the Treasury announced on Tuesday cut profit to $6.9 billion, or $0.91 a share, from $8.3 billion a year earlier.
Did adjusted earnings miss the estimate?
Leaving out the charge, adjusted earnings were $1.08 a share, two cents under the $1.10 estimate compiled by London Stock Exchange Group.
How far were the shares down before the open?
At 7:44 a.m. Eastern the shares were indicated at $51.73, down 4.1% from Tuesday's close of $53.96.
What does the consent order require BoA to do?
It requires the bank to work with a third party to identify suspicious transactions it did not report, and it does not set a date for that review to be finished.
