Bank of America Shares Slip After Third-Quarter Profit Misses Estimates

what happened

GuruFocus reports that Bank of America posted lower profit for the third quarter, as a $1.2 billion regulatory settlement outweighed growth in its lending business. Adjusted earnings reached $1.08 per share, below the $1.10 analysts had projected. Revenue rose 3% to $30 billion, while net income under reported figures slid to $6.9 billion from $8.3 billion a year earlier. Under US GAAP, earnings were 91 cents a share versus $1.04 in the prior-year period.

Net interest income grew 8% to $16.4 billion, helped by expanding loan and deposit balances and the repricing of fixed-rate assets. Average loans and leases rose 6% to $1.23 trillion, and average deposits edged up 2% to $2.02 trillion. On the other side, investment banking fees dropped 11% to $1.8 billion and sales and trading revenue slipped 5% to $5.1 billion. Fixed-income revenue fell 17% to $2.6 billion, while equities revenue climbed 11% to $2.5 billion.

The bank's CET1 capital ratio was 10.9%. Shares dropped nearly 5% in premarket trading on Wednesday.

why it matters

For investors, the mix matters: lending and net interest income are carrying results, while fee income from deal-making and trading is softening. The premarket decline reflects both the miss against estimates and the one-off settlement charge.

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