Bank of America experienced a significant decline in profitability during the third quarter, with net income falling 17% to $6.93 billion, or 91 cents per share. The results were pressured by a $1.2 billion penalty imposed by U.S. regulators related to failures in reporting suspicious transactions. Excluding the penalty’s impact of 17 cents per share, earnings would have reached $1.08 per share. The penalty announcement, made the day before earnings, raised concerns among investors and analysts about the bank’s compliance controls.
Total companywide revenue increased 3.2% on an FTE basis to $30.12 billion, but this fell short of expectations by approximately $570 million. The shortfall was largely attributable to underperformance in trading operations. Fixed income trading revenue declined 17% to $2.55 billion, roughly $450 million below estimates, with weakness across mortgages, municipals and credit activity. Equities trading revenue rose 10% to $2.51 billion but still missed analyst expectations by nearly $300 million. Combined trading results fell 5%, contrary to prior guidance from CEO Brian Moynihan that trading revenue would be roughly flat. Investment banking revenue dropped 11% to $1.8 billion, performing roughly in line with expectations.
Net interest income, a key profit driver, increased 7.9% to $16.6 billion, slightly exceeding the $16.53 billion estimate. The trading weakness drew particular scrutiny from analysts, with one firm calling the capital markets results “easily worst in class” for the quarter. Management attributed bond trading challenges to a sharp rise in interest rates during the period. On the earnings call, analysts pressed management on compliance costs, future share repurchases, and the regulatory issues. Moynihan stated the bank was “confident” in remediation efforts but declined to provide a specific timeline for resolution of regulatory matters.
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