Bank of America third-quarter net income falls to $6.9 billion on $1.2 billion charge; stock falls -6% in pre-market

Bank of America Corporation (BAC) reported third-quarter net income of $6.9 billion, or $0.91 per diluted share, the company said in a filing on Wednesday. Net income was down from $8.3 billion a year earlier. BAC stock was down -6% in pre-market on Wednesday.

The results include a $1.2 billion regulatory settlement charge, or $0.17 per diluted share. Excluding the charge, adjusted net income was $8.1 billion, or $1.08 per diluted share.

Revenue, net of interest expense, rose 3% from a year earlier to $30.0 billion. Net interest income increased 8% to $16.4 billion, while noninterest income was $13.5 billion, down from $13.8 billion.

Here's how the company did:

• Net income: $6.9 billion vs. $8.3 billion a year earlier
• Diluted earnings per share: $0.91 vs. $1.04 a year earlier
• Revenue, net of interest expense: $30.0 billion vs. $29.0 billion a year earlier
• Net interest income: $16.4 billion vs. $15.2 billion a year earlier
• Noninterest expense: $19.7 billion vs. $17.3 billion a year earlier

The noninterest expense figure includes the settlement charge. On Oct. 13, the Office of the Comptroller of the Currency and the Financial Crime Enforcement Network announced that the company had consented to orders covering certain aspects of its Bank Secrecy Act and anti-money laundering and economic sanctions compliance programs.

The company recorded the $1.2 billion to accrue civil money penalties resulting from those orders. The charge is not tax-deductible.

The effective tax rate for the quarter was about 23%, or about 20% excluding the charge, according to the filing.

Chair and CEO Brian Moynihan said: “The team delivered organic growth, deepening client relationships and adding new ones.”

He also said commercial lending grew in every client segment, while investment banking and sales and trading revenues were lower.

In Consumer Banking, net income was $3.5 billion, compared with $3.4 billion a year earlier. Revenue rose 4% to $11.6 billion, driven primarily by higher net interest income.

Global Wealth and Investment Management reported net income of $1.5 billion, up from $1.3 billion. Revenue increased 13% to $7.1 billion, with asset management fees up 16% to $4.5 billion.

Global Banking net income was $2.0 billion, versus $2.1 billion a year earlier. Revenue was $6.2 billion, relatively flat, as higher net interest income and treasury service charges offset lower investment banking fees.

Investment banking fees, excluding self-led deals, decreased 11% to $1.8 billion.

Global Markets net income was $1.2 billion, down from $1.6 billion. Sales and trading revenue fell 5% to $5.1 billion, with fixed income, currencies and commodities revenue down 17% to $2.6 billion and equities revenue up 11% to $2.5 billion.

Executive Vice President and CFO Alastair Borthwick said: “Asset quality continued to improve and liquidity and capital remained strong.”

The provision for credit losses was $1.3 billion, flat from a year earlier and down from $1.4 billion in the second quarter. Net charge-offs were $1.3 billion, and the net charge-off ratio was 0.44%, compared with 0.47% a year earlier.

Nonperforming loans and leases were $5.5 billion, up $197 million from a year earlier.

Average loans and leases rose 6% to $1.23 trillion, and average deposits rose 2% to $2.02 trillion. The preliminary common equity tier 1 ratio under the standardized approach was 10.9%, compared with 11.6% a year earlier.

The company returned $8.3 billion to shareholders in the quarter, including $2.2 billion in common stock dividends and $6.0 billion in common stock repurchases.

Book value per common share rose 4% to $39.26, and tangible book value per share rose 3% to $29.14. Headcount was 209,911 at the end of the quarter, down from 213,384 a year earlier.

The efficiency ratio was 66%, or 62% excluding the settlement charge. Return on average tangible common shareholders' equity was 12.6%.

The filing does not include new financial guidance. The company furnished presentation materials and supplemental information as Exhibits 99.2 and 99.3.

Moynihan added: “Our disciplined investments in AI are helping teammates serve clients better, work faster and manage risk more effectively.”