Oct 14 (Reuters) - Bank of America's profit fell in the third quarter as it set aside $1.2 billion to cover fines by US regulators over widespread failures to detect potential money laundering and other illicit activity.
Shares of the Charlotte, North Carolina-based bank fell 4% in premarket trading. The stock has slipped 1.9% this year through last close.
The fine, unveiled on the eve of BofA's third-quarter earnings, stems from the second-largest US bank'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 on shortcomings in tackling money laundering at US financial giants.
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.
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 abilities 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.
The second-largest US bank's profit was $6.9 billion, or 91 cents per share, in the three months ended September 30, it said on Wednesday. That compares with $8.3 billion, or $1.04 per share, a year earlier.
CAPITAL MARKET WEAKNESS
CEO Brian Moynihan last month projected quarterly investment banking fees and trading revenue below market consensus at the time, sparking a sharp selloff in BofA shares.
BofA's investment banking fees fell 11% to $1.8 billion in the reported 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.
Deal flows also moderated in the quarter as renewed geopolitical uncertainty, rising borrowing costs and market volatility weighed on M&A and IPO activity.
BofA slipped to fourth place in the global investment banking league table for the first nine months of 2026, from third a year earlier, Dealogic data showed.
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.
Banks tend to look at investment banking performance over a longer time frame to gauge underlying business momentum as quarterly trends can fluctuate sharply.
Meanwhile, BofA's sales and trading revenue fell 5% to $5.1 billion in the quarter, dragged down by weakness in fixed income, currencies and commodities.
The bank had last month projected quarterly sales and trading revenue to be relatively flat compared to last year.
(Reporting by Arasu Kannagi Basil in Bengaluru and Saeed Azhar in New York; Editing by Joyjeet Das)
