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BAC Q3 Earnings Miss, Stock Dips on Regulatory Fine, Trading & IB Woes

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Key Takeaways

  • BAC's Q3 adjusted EPS of $1.08 missed estimates, while shares fell more than 7% in pre-market trading.
  • BAC's trading revenues fell 5.5% y/y, ending 17 quarters of growth, while IB fees dropped 15.9%.
  • A $1.2B regulatory settlement and a 13.8% rise in expenses weighed on BAC despite 7.9% NII growth.

Bank of America’s (BAC - Free Report)  third-quarter 2026 adjusted earnings of $1.08 per share missed the Zacks Consensus Estimate of $1.11. In the prior-year quarter, the company reported earnings of $1.04 per share.

Third-quarter 2026 results excluded a $1.2-billion regulatory settlement charge, or 17 cents per share, related to deficiencies in the bank’s anti-money laundering (AML) controls.

Shares of Bank of America declined more than 7% in pre-market trading, primarily reflecting weaker-than-expected earnings and revenues, disappointing capital markets performance, and elevated operating expenses.

Investor sentiment was further dampened by the regulatory settlement, which followed findings of longstanding deficiencies in BAC’s transaction monitoring and compliance oversight. The non-tax-deductible charge weighed on reported earnings, while additional regulatory scrutiny and remediation requirements raised concerns about potential compliance-related costs. While BAC shares lost in pre-market trading, a full day’s trading session will depict a clearer picture.

Behind Bank of America’s Q3 Headline Numbers

Bank of America witnessed dismal trading performance this time around due to weaker fixed-income trading. The company’s total sales and trading revenues, excluding net DVA, declined 5.5% year over year to $5.06 billion, ending a 17-quarter streak of growth. Fixed-income trading fees declined 17.2%, while equity trading income increased 10.4%.

Similarly, amid weakness in advisory and debt underwriting activities, BAC’s investment banking (IB) business performance was also not good this time. IB fees (in the Global Banking division) of $971 million declined 15.9% year over year. Equity underwriting income increased 3.4%, while debt underwriting income declined 15.9% year over year. Advisory revenues fell 21.3%.

While BAC’s capital markets business performance was not impressive this time, year-over-year growth in net interest income (NII) (driven primarily by higher loan and deposit balances, higher NII related to Global Markets activity and fixed-rate asset repricing) drove total revenues.

Provisions declined in the quarter on a year-over-year basis, which was a positive, but non-interest expenses increased, creating another major headwind.

The company’s net income applicable to common shareholders declined 17.2% from the prior-year quarter to $6.54 billion.

BAC’s Revenues Improve, Expenses Rise

Net revenues were $29.96 billion, which missed the Zacks Consensus Estimate of $30.62 billion. However, the top line rose 3.2% from the prior-year quarter.

NII (fully taxable-equivalent basis) grew 7.9% year over year to $16.61 billion. Net interest yield expanded 15 basis points (bps) to 2.16%.

Non-interest income declined 2.2% year over year to $13.51 billion. The fall was due to a decline in total IB fees and fees from market making and similar activities.

Non-interest expenses were $19.72 billion, up 13.8% year over year. The rise was due to an increase in all cost components, except for professional fees.

The efficiency ratio was 65.83%, up from 59.70% in the year-ago quarter. A rise in the efficiency ratio indicates a deterioration in profitability.

Bank of America’s Credit Quality Improves

Provision for credit losses was $1.27 billion, down 2% from the prior-year quarter.

Net charge-offs declined 1.3% year over year to $1.35 billion. As of Sept. 30, 2026, non-performing loans and leases as a percentage of total loans were 0.44%, down 2 bps from the prior-year period.

BAC’s Capital Position Strong

Book value per share as of Sept. 30, 2026, was $39.26 compared with $37.72 a year ago. Tangible book value per share was $29.14, up from $28.16 a year ago.

At the end of September 2026, the common equity tier 1 capital ratio (advanced approach) was 12% compared with 13.1% as of Sept. 30, 2025.

BAC’s Share Repurchase Update

In the reported quarter, the company repurchased shares worth $6 billion.

Our Take on Bank of America

BAC’s near-term prospects remain challenging amid weakness in its capital markets businesses, elevated operating expenses and heightened regulatory scrutiny. The decline in trading revenues and IB fees raises concerns about the sustainability of fee income growth, while the recent regulatory settlement and associated remediation requirements could keep compliance-related costs elevated.

Although growth in NII, improving credit quality and a solid capital position provide some support, these positives may not be sufficient to offset the prevailing headwinds.

Bank of America Corporation Price, Consensus and EPS Surprise

Bank of America Corporation Price, Consensus and EPS Surprise

Bank of America Corporation price-consensus-eps-surprise-chart | Bank of America Corporation Quote

Currently, Bank of America carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Release Dates of BAC’s Peers

Truist Financial (TFC - Free Report) is slated to announce third-quarter 2026 results on Oct. 16.

Over the past seven days, the Zacks Consensus Estimate for TFC’s quarterly earnings has been unchanged at $1.17. The figure implies 12.5% growth from the prior-year quarter’s actual.

KeyCorp (KEY - Free Report) is slated to announce third-quarter 2026 results on Oct. 20.

Over the past seven days, the Zacks Consensus Estimate for KEY’s quarterly earnings has been unchanged at 46 cents. The figure implies 12.2% growth from the prior-year quarter’s actual.

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