Bank of America Q3 Profit Falls on $1.2 Billion AML Charge

Bank of America’s third-quarter profit fell 17% as a $1.2 billion charge to settle anti-money-laundering failures and a weaker trading performance overshadowed solid growth in lending income, sending its shares sharply lower on Wednesday.

The second-largest US bank by assets reported net income of $6.9 billion, or $0.91 a diluted share, for the quarter ended September 30, down from $8.3 billion, or $1.04 a share, a year earlier. Excluding the settlement charge, adjusted earnings came to $8.1 billion, or $1.08 a share. Revenue, net of interest expense, rose 3% to $30.0 billion.

Both figures fell short of Wall Street expectations. According to Investing.com, analysts had forecast adjusted earnings of $1.10 a share and revenue of $30.58 billion. The stock dropped 8.57% in premarket trading to $49.34 from a prior close of $53.96, and CNBC reported a fall of about 8% after the results.

The cost of compliance lapses

The settlement charge, equal to $0.17 a share, is not tax-deductible. It relates to consent orders announced on October 13 by the Office of the Comptroller of the Currency (OCC) and the Financial Crimes Enforcement Network (FinCEN), covering parts of the bank’s US Bank Secrecy Act, anti-money-laundering and economic sanctions compliance programmes, according to the bank’s filing.

On the earnings call, chief financial officer Alastair Borthwick said the consent order does not impose an asset cap and should not constrain normal operations or affect clients, according to a MarketBeat summary. Chief executive Brian Moynihan said the settlement resolved the penalty tied to a 2024 cease-and-desist order, and that management was clear on what remediation work remained. The bank has said it has invested billions in technology and assigned thousands of employees to fixing its controls.

The absence of an asset cap matters. Regulators’ growth cap on Wells Fargo after its fake-accounts scandal constrained that bank for about seven years, which is why the detail drew attention. Borthwick described the charge as a one-time item rather than a recurring cost, though ongoing remediation spending is built into the bank’s expense base.

The penalty comes in a busy period for financial-crime enforcement in US banking. Earlier this month, American Express was fined $350 million over its own anti-money-laundering shortcomings.

Lending strong, trading weak

Beneath the charge, the quarter told two stories. Net interest income rose 8% to $16.4 billion, helped by higher loan and deposit balances and the repricing of fixed-rate assets. The net interest yield improved 15 basis points to 2.16%. Average loans and leases grew 6% to $1.23 trillion, and Moynihan said commercial lending grew in every client segment.

Wall Street businesses were softer. Sales and trading revenue fell 5% to $5.1 billion as fixed income, currencies and commodities revenue dropped 17% to $2.6 billion, hit by weaker mortgage, municipal and credit products. Equities trading rose 11% to $2.5 billion. Investment banking fees fell 11% to $1.8 billion.

That contrasts with rivals. On Tuesday, Goldman Sachs beat forecasts as equities revenue jumped, while JPMorgan Chase missed estimates for the first time in nearly three years.

The wealth management arm was a bright spot. Revenue rose 13% to $7.1 billion, asset management fees climbed 16% to $4.5 billion, and client balances reached $5.1 trillion. In consumer banking, card spending rose 8% to $266 billion and the bank added more than 200,000 net new checking accounts, its 31st straight quarter of growth.

Credit holds up, capital ratio slips

Credit quality remained stable. The provision for credit losses was $1.3 billion, roughly unchanged from a year ago, and the net charge-off ratio improved to 0.44%. The credit card charge-off rate fell to 3.22% from 3.46%.

The common equity tier 1 (CET1) ratio, a key measure of capital strength, slipped to 10.9% from 11.2% in the June quarter and 11.6% a year earlier. Even so, the bank returned $8.3 billion to shareholders, including about $6 billion in buybacks and $2.2 billion in dividends.

Why it matters

For investors, the result raises questions about how much of the market’s confidence in large US banks rests on trading and deal fees, which have been volatile this season. Bank of America leans more heavily on interest income than trading-focused peers such as Goldman Sachs, and on that measure it delivered. But the revenue miss, the hit from the penalty and a lower capital ratio help explain the sharp share price reaction.

Management is leaning on interest income for the year ahead. Borthwick said full-year 2026 net interest income growth remained on track at about 8%, and the bank expects 2027 growth of “8% or more.” That outlook assumes three 25-basis-point rate increases through June 2027, though Borthwick said it does not depend solely on rates. The bank also expects to return to positive operating leverage in the fourth quarter.

For Indian markets, the rate assumption is the more relevant signal. A large US lender planning around Federal Reserve hikes into mid-2027 underlines the risk of tighter global financial conditions, which can weigh on foreign portfolio flows into emerging markets such as India and add pressure on the rupee.

What comes next

Investors will watch whether Bank of America can deliver the promised net interest income growth and operating leverage in the December quarter, and whether trading revenue recovers. Remediation progress under the consent orders and the final shape of US capital rules, which the bank said it is still awaiting, will shape how much capital it can return in 2027.