Bank of America stock on track for worst day since 2025 as $1.2 billion fine weighs on Q3 earnings

Bank of America's ( BAC ) stock dropped more than 7% Wednesday, putting shares for the nation's second largest bank on track for its worst single-day move since April 2025 as a $1.2 billion regulatory penalty dragged down results.

The nation's second biggest bank reported third quarter net income of $6.93 billion, or $0.91 per share, compared with the $1.10 per share analysts expected. Excluding the regulatory penalty, Bank of America said it earned $8.1 billion, or $1.08 per share.

Revenue rose 3% to $30 billion, compared with expectations of roughly $30.6 billion.

US regulators charged the Charlotte, North Carolina-based bank $1.2 billion in fines on Tuesday afternoon over widespread failures in the banking giant's safeguards against money laundering and other illicit financial activity

Bank of America's CFO Alastair Borthwick told reporters later Wednesday that much of the spending the bank expects will be needed to fix those failures is already reflected in its operating expenses, as it has already devoted thousands of employees and substantial technological investment to address the regulatory deficiencies.

Borthwick declined to specify when the regulators might formally conclude the remediation process.

Regulatory enforcement orders for major banks can take years. A wider consent order related to a fake account scandal at Wells Fargo lasted for over eight years and included an onerous asset growth restriction on the bank over that period.

During the company's earnings call with analysts, CFO Borthwick clarified that there is no growth restriction with the consent order.

Bank of America's results also offered another glimpse into how America's biggest banks are navigating a quarter with sharply rising borrowing costs, which have supported higher lending income while complicating activity for some of their Wall Street businesses.

"While investment banking and sales and trading revenues were lower, commercial lending grew in every client segment," Bank of America CEO Brian Moynihan said in a statement with the release.

"Our momentum, reflected in growth in client deposits, wealth flows and consumer activity, supported solid earnings, balance-sheet growth and long-term shareholder value," he added.

Bank of America's net interest income, a core measure for what the bank earns from lending, rose 8% from a year earlier to $16.4 billion, supported by higher loan and deposit balances.

Meanwhile, investment banking fees fell 11% from a year earlier to $1.8 billion while still surpassing analyst forecasts after CEO Moynihan telegraphed the bank's relatively softer period for dealmaking.