- Bank of America shares dropped 8.3% after weaker Q3 results and a $1.2 billion penalty
- Q3 net income fell 17% to $6.93 billion, missing analyst earnings expectations
- Trading revenue declined 5%, with a 17% drop in fixed income, currencies, and commodities
Bank of America shares tumbled more than 8% on Wednesday after the US banking giant reported weaker-than-expected third-quarter results, with a $1.2 billion regulatory penalty and a slowdown in trading revenue weighing on investor sentiment.
The bank's stock fell 8.3% at the opening bell, putting it on track for its steepest single-day decline since April 2025. The sell-off followed the lender's disclosure of a penalty linked to failures in detecting and reporting suspicious financial transactions.
Bank of America, the second-largest US lender by assets, reported net income of $6.93 billion, or $0.91 per share, for the quarter, down 17% from a year earlier. Analysts had expected earnings of $1.10 per share.
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Excluding the regulatory charge, the bank said it earned $8.1 billion, or $1.08 per share. Revenue rose 3% year-on-year to $30 billion, but fell short of analysts' expectations of around $30.6 billion.
The bank's sales and trading revenue declined 5% to $5.1 billion during the quarter, as weakness in fixed income, currencies and commodities (FICC) offset record quarterly equities trading.
FICC revenue fell 17%, driven largely by softer performance in mortgages, municipal securities and credit. The weakness echoed trends reported by other major Wall Street lenders, including JPMorgan Chase, Wells Fargo and Goldman Sachs.
Net interest income (NII), however, provided some support. The measure, which captures the difference between interest earned on loans and paid on deposits, climbed 8% to $16.4 billion. Higher loan and deposit balances, along with the repricing of fixed-rate assets, helped drive the increase.
Investment banking fees fell 11% to $1.8 billion, reflecting a softer quarter for dealmaking. The decline was broadly in line with the bank's earlier guidance, although the fees remained above analyst forecasts.
Despite the slowdown, Chief Financial Officer Alastair Borthwick said the environment for dealmaking remained solid and that the bank's investment banking pipeline was strong.
The regulatory charge stems from Bank of America's failure to report more than $5 billion in suspicious activity to US authorities. The penalty, announced on Tuesday, ranks among the largest in the history of the US Treasury.
The bank has also been placed under a consent order requiring it to work with a third party to identify and report suspicious transactions that went undetected.
Borthwick said the lender had been working with regulators for some time to resolve the issues and had added thousands of employees to strengthen its anti-money laundering controls.
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He added that much of the spending required to address the shortcomings was already reflected in operating expenses. The bank did not specify when regulators might conclude the remediation process.
CEO Brian Moynihan said commercial lending grew across every client segment during the quarter. He also pointed to growth in customer deposits, wealth flows and consumer activity as supporting the bank's earnings and balance-sheet expansion.
However, the combination of a regulatory penalty, weaker trading income and a revenue miss left investors questioning the near-term outlook for the lender.
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