By Arasu Kannagi Basil and Saeed Azhar
Oct 14 (Reuters) – Bank of America missed third-quarter profit estimates on Wednesday due to weakness in its trading business and disclosed a $1.2 billion charge tied to a regulatory penalty over failures to detect potential money-laundering activity.
Shares of the second-biggest US lender fell more than 8%, hitting their lowest price since May.
The Wall Street giant posted weaker fixed income, currency and commodities revenue, mirroring third-quarter trends at rivals JPMorgan Chase, Wells Fargo and Goldman Sachs.
“The poor capital markets performance doubles the negative impact of the earnings miss,” Zacks Investment Management Chief Market Strategist Brian Mulberry said.
BofA’s sales and trading revenue fell 5% to $5.1 billion in the quarter, as weakness in FICC overshadowed record quarterly equities trading. The bank had last month projected quarterly sales and trading revenue to be relatively flat compared to last year.
“Reduced client activity and changing market conditions, including a major shift in interest rates, significantly affected our leading FICC businesses, including credit mortgages and municipals,” Chief Financial Officer Alastair Borthwick said.
Rival JPMorgan on Tuesday also fell short of quarterly profit estimates as dealmaking, bond trading momentum slowed down.
Asked how much longer he plans on remaining BofA’s CEO, Brian Moynihan said succession is the board’s decision.
Moynihan has been at the helm of the storied US bank since 2010 and is one of the longest-serving CEOs of a major US bank.
REGULATORY SETTLEMENT CHARGE
The fine, unveiled late Tuesday, stems from BofA’s failure to report over $5 billion in suspicious activity to the US government.
The actions, which include the third-largest penalty in US Treasury history, highlight growing regulatory scrutiny of shortcomings in tackling money laundering at US financial giants.
“There’s no asset cap here. It won’t crowd out anything,” Borthwick told analysts.
Regulators have placed BofA under a consent order — a major regulatory punishment — that requires the bank to work with a third party to identify and report suspicious transactions that went undetected.
BofA had been working with regulators for some time to reach the resolutions, Borthwick said, adding the bank had added thousands of people to shore up its efforts to tackle money laundering.
The Charlotte, North Carolina-based bank reported a profit of $6.9 billion, or 91 cents per share, for the three months ended September 30, compared with $8.3 billion, or $1.04 per share, a year earlier.
Excluding the $1.2 billion regulatory settlement charge, BofA earned $1.08 per share, missing estimates of $1.10 per share, according to estimates compiled by LSEG.
Wall Street analysts said the penalty would likely add to negative sentiment and raise concerns about expenses and the duration of the order.
The penalty follows a 2024 consent order from the Office of the Comptroller of the Currency, which had required BofA to address shortcomings in its ability to police money laundering.
Since late 2023, BofA has been working with US regulators to overhaul its safeguards against money laundering and other illegal transactions.
NII SHINES AS DEALMAKING WEAKENS
BofA’s investment banking fees fell 11% to $1.8 billion in the quarter. The bank had last month projected a decline of at least 10%, as it wasn’t well positioned in some businesses that saw more activity.
Dealmaking also slowed in the reported quarter as a grinding bond market rout and equities volatility weighed on activity.
“There’s a period in volatility like that where buyers and sellers just need to readjust valuations and expectations. So that always happens,” Borthwick said, referring to the move in interest rates.
Investment banking fees can be lumpy from quarter-to-quarter and are influenced by when deals close. Transaction timing can often move around due to market conditions and regulatory approvals.
“The environment for deal making remains solid. It’s a pretty active environment,” Borthwick said, adding that BofA’s investment banking pipelines are strong.
BofA slipped to fourth place in the global investment banking league table for the first nine months of 2026, from third in the same period a year earlier, Dealogic data showed.
In a bright spot, net interest income (NII) — the difference between what a bank earns on loans and pays out on deposits — jumped 8% in the quarter, driven by higher loan and deposit balances and fixed-rate asset repricing.
BofA expects interest income to improve sequentially in the fourth-quarter. Full-year NII growth is anticipated to be 8% or more in 2027.
(Reporting by Arasu Kannagi Basil in Bengaluru and Saeed Azhar in New York; Editing by Joyjeet Das, Louise Heavens and Nick Zieminski)
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