Earnings

Bank of America Books $1.2 Billion Penalty Charge After Three Regulators Settle Its Anti-Money-Laundering Case

The bank accrued $1.2 billion for civil penalties in the third quarter, and net income fell to $6.9 billion from $8.3 billion.

Bank of America took a $1.2 billion non-tax-deductible charge in the third quarter for civil penalties tied to the October 13 resolutions, according to the bank's 10-Q filed Friday. The charge closes out an anti-money-laundering matter that the prior quarter's report described as open-ended.

Three regulators, one charge

The actions concern the bank's compliance programs for money laundering and sanctions, including the Bank Secrecy Act. OFAC settled, while the OCC and FinCEN issued consent orders.

The June-quarter filing said resolving the OCC order or other inquiries "may include the payment of monetary penalties and other remedial actions." The new filing says the penalties have been accrued.

The charge sits in noninterest expense, which rose $2.4 billion to $19.7 billion. "Other general operating" expense jumped to $2,333 million from $912 million a year earlier. Net income fell to $6.9 billion, or $0.91 per diluted share, from $8.3 billion, or $1.04, a year earlier. The effective tax rate rose to 22.7% from 19.9%, which the bank attributed mainly to the non-deductible charge.

Remediation work continues

Both the FinCEN order and the December 2024 OCC order, which was disclosed earlier, demand fixes to those programs. Independent consultants must review past transactions and due diligence.

The bank says it has completed significant steps under the OCC order. Since late 2023 it has added dedicated personnel and invested in technology. It does not expect ongoing remediation costs to have a significant effect on consolidated noninterest expense in future periods.

Capital and buybacks

Bank of America, a Charlotte, North Carolina-based bank holding company serving consumers, businesses, institutions and governments, repurchased $6.0 billion of common stock in the quarter and paid $2.2 billion in common dividends. Its common equity tier 1 capital ratio under the standardized approach ended September at 10.9%, from 11.2% at June 30, against a 10.0% minimum.

On January 1, 2027, its global systemically important bank surcharge rises 0.5 percentage points, lifting its minimum common equity requirement by the same amount. On October 23 it issued $2.0 billion of Series WW preferred stock with a 7.200% rate. At Friday's report, its market value was $354.0 billion.

The independent-consultant reviews ordered by the FinCEN and OCC consent orders, and the January 1, 2027 surcharge increase, are the next measurable pressure points.