Bank of America Heads Into Q3 Earnings Carrying a $1.2 Billion Treasury Penalty

Bank of America received a $1.2 billion bill from the US Treasury a day before its earnings report.

On Tuesday, the Treasury hit the second-largest US bank with more than $1.21 billion in anti-money-laundering and sanctions penalties. The bank said the charge will cut third-quarter net income by about 17 cents per share.

A $1.2 Billion Bill Lands on the Eve of Bank of America’s Q3 Earnings

The penalties total more than $1.21 billion and come from three Treasury agencies.

• $1.2 billion from FinCEN: The Financial Crimes Enforcement Network’s penalty is the third-largest in Treasury history.
• $750 million from the OCC: The Office of the Comptroller of the Currency imposed its largest penalty ever, counted within FinCEN’s figure.
• $11.66 million from OFAC: The Office of Foreign Assets Control settled separately over 475 apparent sanctions violations.

According to the press release, Bank of America admitted to willfully violating the Bank Secrecy Act. Treasury said the bank failed to report more than $5 billion in suspicious transactions on time.

Over $1 billion of that activity involved national security or other priority risks, including transactions pointing to Chinese money laundering networks.

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What the Fine Does to Wednesday’s Numbers

A Bank of America spokesperson set out the earnings impact in a statement.

“Our third-quarter results will include a non-tax-deductible charge of $1.2 billion impacting net income by approximately 17 cents per share. We have already dedicated substantial personnel and resources to our ongoing remediation efforts, and those costs are in the current expense base,” the spokesperson said.

The spokesperson said the bank has put billions into technology and thousands of staff toward fighting financial crime. It said remediation work is well advanced.

Investors reacted before the numbers arrived. The stock closed at $53.96 on Tuesday, down 1.14% from Monday’s close of $54.58.

It then slid 2.29% to $52.73 in after-hours trading once the penalty became public.

Wall Street Had Already Marked Down the Quarter

The Zacks consensus calls for earnings per share (EPS) of $1.12 on revenue of $30.62 billion. Analysts lowered that EPS estimate from $1.18 a month ago.

In September, Chief Executive Brian Moynihan warned that investment banking fees would drop at least 10% year over year. He projected investment banking fees of $1.6 billion to $1.8 billion, below the roughly $2 billion analysts had expected. Bank of America shares fell more than 5% that day. 

Bank of America now reports before Wednesday’s open, a day after rival JPMorgan missed analyst estimates. Results are due at about 6:45 a.m. ET, with an investor call at 8:30 a.m.

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