Bank of America reported a sharp drop in profits following a $1.2 billion fine

Bank of America, the second-largest U.S. bank by assets, saw its third-quarter profit plummet. It was 17% lower than in the same period last year, coming in at $0.91 per share, according to the report. The results were partly affected by a large $1.2 billion fine from the U.S. Treasury Department, which was announced the day before. Excluding this amount, earnings would have been $1.08 per share, but even then, they would not have met Wall Street analysts’ expectations: they had forecast $1.10, according to CNBC.

BofA's revenue rose 3% to approximately $30 billion, compared with the consensus estimate of $30.69 billion.

Bloomberg notes that BofA traders' results in the stock and bond markets also fell short of market expectations. Revenue from bond trading fell by 17%, while stock trading generated 10% less revenue.

Revenue from the investment banking division fell by 11%, but the decline was less than analysts had expected.

The bank's stock price plummeted 4.4% in pre-market trading in New York following the release of the report.

The Ministry of Finance accused BofA of “egregious” violations in the areas of anti-money laundering and sanctions compliance. According to the ministry, the bank “effectively outsourced” a significant portion of its compliance work in an attempt to save revenue and failed to properly report suspicious transactions totaling more than $5 billion.

In addition to paying the fine itself, the bank will have to incur additional expenses to address the identified issues—these costs have already been factored in, BofA said.

CNBC believes this situation will inevitably raise questions about the extent to which CEO Brian Moynihan controls internal procedures at one of the country’s largest financial institutions. Moynihan took the helm in 2010, and during his early years at the bank, the institution was working to address the fallout from mortgage market abuses uncovered after the 2008 financial crisis.

BofA’s results provide insight into the state of U.S. consumers: interest rates are rising, and the war in Iran is keeping gas prices high, Bloomberg notes. The bank set aside $1.27 billion for potential losses on non-performing loans, though this is less than analysts had expected. Net loan write-offs fell to $1.35 billion—also below forecasts.

Market volatility has generally benefited BofA’s competitors, particularly their equity trading divisions: they have been actively trading amid sharp price swings caused by geopolitical tensions and concerns about artificial intelligence, according to Bloomberg. At the same time, high interest rates are holding back bond trading and lending in general.

Goldman Sachs and JPMorgan recently reported strong third-quarter equity trading results, which were offset by a decline in revenue from their bond trading divisions. At the same time, JPMorgan, the largest U.S. bank, failed to meet earnings per share and revenue forecasts for the first time in several years.

This article was AI-translated and verified by a human editor