Bank of America's third-quarter profit fell 17% after a $1.2 billion penalty from U.S. regulators, and revenue missed estimates because trading results came in below expectations. Shares dropped more than 7% in premarket trading.
Bank of America posted a 17% drop in third-quarter profit to $6.93 billion, or 91 cents a share, after U.S. regulators hit it with a $1.2 billion penalty. Shares fell more than 7% in premarket trading on Wednesday.
Excluding the penalty, which sapped income by 17 cents, earnings would have been $1.08 a share. LSEG analysts had expected $1.10.
Trading desks fall short of expectations
Revenue rose 3.2% to $30.12 billion on an FTE basis, but that was about $570 million below the $30.69 billion LSEG expected. Misses in Wall Street trading drove most of the gap.
Fixed income trading revenue fell 17% to $2.55 billion on weakness in mortgages, municipals and credit activity. Equities trading revenue climbed 10% to $2.51 billion, yet it still landed nearly $300 million under analyst estimates.
CEO Brian Moynihan told analysts last month that trading revenue would be roughly flat, but combined bond and stock trading results fell by 5%.
Lending and credit hold steady
Other lines were steadier. Net interest income rose 7.9% to $16.6 billion, slightly above the $16.53 billion StreetAccount estimate, while investment banking revenue dropped 11% to $1.8 billion, roughly in line with expectations.
MarketWatch reported growth in commercial-lending and consumer-loan activity at the bank. Credit quality of those borrowers remained stable, with money set aside for loan losses about the same as last year.
Treasury penalty raises control questions
U.S. regulators said the company failed to report billions of dollars in suspicious transactions. According to CNBC, the episode will inevitably spark questions about whether Moynihan has a handle on controls at the second-biggest U.S. bank by assets.
Sources: CNBC, MarketWatch (snippet-based)
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