Bank of America disclosed third-quarter results on Wednesday that included a significant profitability decline and trading disappointments, prompting a sharp decline in the company’s stock price.
The bank’s net income fell 17% to $6.93 billion, or 91 cents per share, as the company absorbed a $1.2 billion penalty imposed by U.S. regulators related to failures in reporting suspicious transactions. Excluding the regulatory charge, which reduced earnings per share by 17 cents, adjusted EPS would have reached $1.08. Total company revenue climbed 3.2% on an FTE basis to $30.12 billion, but fell approximately $570 million short of analyst expectations, primarily driven by underperformance in Wall Street trading operations.
Capital markets revenue presented particular challenges during the quarter. Fixed income trading revenue declined 17% to $2.55 billion, driven by weakness in mortgage, municipal, and credit trading activities, and landed roughly $450 million below analyst estimates. Equities trading revenue increased 10% to $2.51 billion but still underperformed expectations by nearly $300 million. Combined, the trading results fell 5% versus earlier guidance from CEO Brian Moynihan that suggested trading revenue would remain roughly flat. Investment banking revenue declined 11% to $1.8 billion, tracking closely with expectations. Net interest income, a key profitability metric for the institution, rose 7.9% to $16.6 billion, slightly exceeding the $16.53 billion analyst estimate.
Management attributed the trading underperformance to elevated interest rates, with Chief Financial Officer Alastair Borthwick noting that a significant rate increase during the quarter created headwinds for credit and mortgage trading. The regulatory penalty and trading results drew scrutiny from analysts during the earnings call, with several questioning management’s control over compliance costs and the bank’s capital markets competitiveness. CEO Moynihan acknowledged the challenges but stated confidence in remediation efforts, though he declined to specify a timeline for resolving outstanding regulatory matters.
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