Bank of America profits fall 17% after $1.2bn money laundering penalty

The US banking giant posted net income of $6.93bn, or $0.91 a share, down from $8.3bn a year earlier and below analysts' expectations. Revenue rose 3.2% to $30.12bn but also fell short of consensus forecasts.

The results came just a day after US regulators announced a sweeping enforcement action against the bank over failures in its anti-money laundering and sanctions controls including transactions potentially tied to Chinese money-laundering networks, narcotics trafficking, and fraud.

Authorities alleged Bank of America failed to adequately monitor customer activity and report billions of dollars of suspicious transactions over a number of years.

The settlement includes a $1.2bn penalty from the Treasury Department's Financial Crimes Enforcement Network, alongside additional sanctions from other regulators, making it one of the largest anti-money laundering enforcement actions imposed on a US lender.

Excluding the one-off charge, earnings would have been $1.08 a share, highlighting the significant impact of the settlement on quarterly profitability.

Management sought to reassure investors that substantial investments have already been made in compliance systems, transaction monitoring technology and financial crime controls, with remediation efforts continuing under regulatory oversight.

Away from the penalty, performance across the group's businesses was mixed. While overall revenue increased year-on-year, trading operations failed to match market expectations.

Fixed-income trading revenue fell 17% to $2.55bn as activity weakened across mortgage, municipal and credit markets, marking one of the softer areas of the quarter.

Equities trading provided a brighter spot, with revenue rising 10% to $2.51bn, although the figure still came in slightly below Wall Street forecasts.

Reporting by Frank Prenesti for Sharecast.com