Bank of America experienced a significant decline in stock value following the release of third-quarter earnings results on Wednesday. The bank reported a profit of $6.93 billion, or 91 cents per share, representing a 17% decrease from the prior year period. The decline was substantially influenced by a $1.2 billion penalty imposed by U.S. regulators, which reduced earnings per share by 17 cents. Excluding the penalty, the bank would have reported earnings of $1.08 per share.
Companywide revenue totaled $30.12 billion on a FTE basis, up 3.2% compared to the prior year quarter but falling approximately $570 million short of analyst expectations. Trading operations proved to be a significant source of disappointment. Fixed income trading revenue declined 17% to $2.55 billion, with weakness in mortgages, municipals, and credit activity contributing to a shortfall of roughly $450 million relative to StreetAccount estimates. Equities trading revenue increased 10% to $2.51 billion but also underperformed expectations by nearly $300 million. Combined bond and stock trading results declined 5%, contradicting prior guidance from CEO Brian Moynihan that indicated trading revenue would remain roughly flat. Investment banking revenue dropped 11% to $1.8 billion, which aligned with analyst expectations and prior guidance. Net interest income, a key profitability metric, rose 7.9% to $16.6 billion, marginally exceeding the StreetAccount estimate of $16.53 billion.
The regulatory penalty stemmed from the bank’s failure to report billions of dollars in suspicious transactions to the Treasury. This development sparked analyst questions regarding management’s control over compliance operations at the second-largest U.S. bank by assets. During the earnings call, management attributed trading underperformance to a substantial rise in interest rates during the quarter, noting that a 85 basis point increase during the period adversely affected credit and mortgage trading businesses. CEO Moynihan stated he was confident the bank remained on the correct course for remediation but declined to specify a timeline for resolving regulatory matters.
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