Bank of America shares fell sharply Wednesday after the lender missed third-quarter profit expectations and recorded a $1.2 billion charge tied to a major U.S. anti-money-laundering enforcement action.
The bank reported third-quarter net income of $6.9 billion, or $0.91 per diluted share, on revenue of approximately $30.0 billion.
Excluding the regulatory charge, earnings were $1.08 per share, still below the $1.10 expected by analysts surveyed by LSEG. Bank of America shares fell more than 8%, reaching their lowest level since May.
Trading was another source of pressure.
Sales and trading revenue declined 5% to $5.1 billion as weakness in fixed income, currencies and commodities outweighed record quarterly equities performance.
Investment-banking fees fell 11% to approximately $1.8 billion.
Net interest income provided some offset, increasing 8% as loan and deposit balances expanded.
The earnings report arrived one day after the U.S. Treasury announced enforcement actions against Bank of America involving more than $1.21 billion in penalties.
FinCEN assessed a $1.2 billion penalty after finding deficiencies involving the bank’s anti-money-laundering program and suspicious-activity reporting. The agency said Bank of America failed to timely report more than $5 billion in suspicious transactions.
The Office of the Comptroller of the Currency separately assessed a $750 million civil penalty that is credited against the FinCEN penalty.
For investors, Wednesday’s decline reflects two separate concerns: weaker-than-expected operating performance in important Wall Street businesses and the continuing cost of addressing regulatory-control deficiencies.
The bank’s consumer and lending franchises remain substantial, but the quarter puts additional attention on trading performance, expense control and progress in strengthening compliance systems.
The next test will be whether capital-markets revenue improves while Bank of America completes the remediation required by regulators.
