Bank of America has received a $1.21 billion penalty from three US Treasury agencies on the eve of its third-quarter earnings report. The sanctions and anti-money-laundering (AML) enforcement action will reduce the second-largest US bank's Q3 net income by approximately 17 cents per share.
Detailed Breakdown of Treasury Penalties
The regulatory action stems from willful violations of the Bank Secrecy Act, with Treasury officials noting that Bank of America failed to report more than $5 billion in suspicious transactions on time. Over $1 billion of those unflagged transactions involved priority risks or national security concerns, including networks tied to Chinese money laundering.
Key details of the multi-agency regulatory penalties include:
- FinCEN (Financial Crimes Enforcement Network): Issued a $1.2 billion fine, marking the third-largest penalty in Treasury history.
- OCC (Office of the Comptroller of the Currency): Imposed a record $750 million penalty, which is counted within the overall FinCEN total.
- OFAC (Office of Foreign Assets Control): Settled separately for $11.66 million regarding 475 apparent sanctions violations.
A spokesperson for Bank of America confirmed that the $1.2 billion non-tax-deductible charge will directly impact third-quarter net income. The spokesperson added that ongoing remediation efforts and technology investments of billions of dollars are already included in the bank's current expense base.
Impact on Q3 Earnings and Stock Performance
Following the announcement, Bank of America stock dropped 2.29% to $52.73 in after-hours trading on Tuesday, after closing the regular session down 1.14% at $53.96 from Monday's close of $54.58.
The penalty adds pressure to an already revised quarterly outlook. Zacks consensus estimates had called for earnings per share (EPS) of $1.12 on revenue of $30.62 billion, down from an EPS forecast of $1.18 a month earlier. In September, Chief Executive Brian Moynihan warned that investment banking fees would slide at least 10% year-over-year to between $1.6 billion and $1.8 billion—below analyst projections of $2 billion—which sent shares down more than 5% that day.
Bank of America is scheduled to report its Q3 financial results at approximately 6:45 a.m. ET on Wednesday, followed by an investor call at 8:30 a.m. ET, coming just one day after JPMorgan missed analyst estimates.
Why It Matters
This massive Treasury penalty underscores the intensifying regulatory scrutiny faced by legacy financial institutions over systemic compliance failures and AML oversight. Absorbing a 17-cent-per-share charge immediately prior to reporting headline earnings compounds existing top-line pressures from declining investment banking revenue. Market participants will closely monitor whether Bank of America's ongoing compliance investments can successfully remediate its regulatory framework without further hitting long-term profitability.
