Bank of America shares traded flat on Thursday after a 5% earnings-led crash. Profits fell over 15% in the third quarter as the bank took a $1.2 billion hit from regulatory fines. While trading results were weak, loan balances increased 6.3% to $1.23 trillion, meeting many analyst expectations for growth.
After a 5% earnings-led crash in the previous session, shares of Bank of America (BofA) were trading flat in pre-market trading on Thursday. Profits at the second-largest US bank fell more than 15% in the third quarter after it took a $1.2 billion hit from a regulatory fine related to money laundering and sanctions violations.
The company announced a $1.2 billion non-tax-deductible charge related to the fines. The US Treasury Department said on Tuesday that the bank had effectively outsourced a key part of its compliance efforts as it sought to protect revenue.
BofA said the costs of remediating the issues were already factored into its expenses.
The charge reduced earnings by 17 cents per share and contributed to a 17% decline in net income to $6.9 billion from $8.3 billion a year earlier. The bank's total revenue came in at nearly $30 billion, missing analysts' consensus estimates.
Its trading businesses also delivered weaker-than-expected results. Fixed-income trading revenue declined 17% to $2.55 billion, while equity-trading revenue increased 10% to $2.51 billion.
Despite the earnings pressure, Bank of America's loan balances increased 6.3% year-on-year to $1.23 trillion at the end of the third quarter, in line with analysts' estimates. Meanwhile, investment-banking revenue fell 11% to $1.82 billion, although it came in above analysts' expectations.
Fees for advising on mergers and acquisitions declined 19%. Revenue from equity issuance increased 9.1%, while debt-issuance revenue fell nearly 14%.
Meanwhile, the results offered insights into the health of US consumers amid rising interest rates and elevated gas prices linked to the conflict in Iran. The bank set aside $1.27 billion for potentially souring loans, below analysts' expectations of $1.5 billion.
The bank reported its results less than 24 hours after the US Treasury announced a fine of more than $1 billion against BofA for what it described as egregious and continued money laundering and sanctions violations. The department concluded that the bank had failed to properly report more than $5 billion in suspicious transactions.
US bank earnings season wraps up
Along with BofA, Morgan Stanley also reported its results, completing the third-quarter earnings announcements of the six largest US banks following reports from four lenders on Tuesday. Goldman Sachs, Citigroup, and Wells Fargo exceeded Wall Street's estimates, while JPMorgan Chase reported profits below analysts' expectations for the first time in nearly three years.
The earnings season unfolded against a turbulent backdrop, with the conflict in Iran, elevated energy prices, and a global bond-market sell-off weighing on financial markets and deal-making activity.
Bank of America shares extend losses from record high
After a prolonged rally, Bank of America shares have come under pressure amid concerns about tighter monetary policy. The stock has fallen 6% so far this month, following a 12% decline in September.
From its record high of $65.22, the stock has now fallen nearly 21%, turning its year-to-date performance negative, with a 6% decline. If it ends 2026 in the red, it would mark its first annual decline in three years.