Bank of America missed third-quarter profit estimates on Wednesday due to weakness in its trading business and disclosed a $1.2bn charge tied to a regulatory penalty over failures to detect potential money-laundering activity.
The Wall Street giant posted weaker fixed income, currency and commodities revenue, mirroring third-quarter trends at rivals JPMorgan Chase, Wells Fargo and Goldman Sachs.
"The poor capital markets performance doubles the negative impact of the earnings miss," Zacks Investment Management Chief Market Strategist Brian Mulberry said.
BofA's sales and trading revenue fell 5% to $5.1bn in the quarter, as weakness in FICC overshadowed record quarterly equities trading. The bank had last month projected quarterly sales and trading revenue to be relatively flat compared to last year.
"Reduced client activity and changing market conditions, including a major shift in interest rates, significantly affected our leading FICC businesses, including credit mortgages and municipals," Chief Financial Officer Alastair Borthwick said.
Rival JPMorgan on Tuesday also fell short of quarterly profit estimates as dealmaking, bond trading momentum slowed down.
Asked how much longer he plans on remaining BofA's CEO, Brian Moynihan said succession is the board's decision.
Moynihan has been at the helm of the storied US bank since 2010 and is one of the longest-serving CEOs of a major US bank.
The fine, unveiled late Tuesday, stems from BofA's failure to report over $5bn in suspicious activity to the US government.
The actions, which include the third-largest penalty in US Treasury history, highlight growing regulatory scrutiny of shortcomings in tackling money laundering at US financial giants.
"There's no asset cap here. It won't crowd out anything," Borthwick told analysts.
Regulators have placed BofA under a consent order — a major regulatory punishment — that requires the bank to work with a third party to identify and report suspicious transactions that went undetected.
BofA had been working with regulators for some time to reach the resolutions, Borthwick said, adding the bank had added thousands of people to shore up its efforts to tackle money laundering.
The Charlotte, North Carolina-based bank reported a profit of $6.9bn, or 91 cents per share, for the three months ended September 30, compared with $8.3bn, or $1.04 per share, a year earlier.
Excluding the $1.2bn regulatory settlement charge, BofA earned $1.08 per share, missing estimates of $1.10 per share, according to estimates compiled by LSEG.
Wall Street analysts said the penalty would likely add to negative sentiment and raise concerns about expenses and the duration of the order.
The penalty follows a 2024 consent order from the Office of the Comptroller of the Currency, which had required BofA to address shortcomings in its ability to police money laundering.
Since late 2023, BofA has been working with US regulators to overhaul its safeguards against money laundering and other illegal transactions.
BofA's investment banking fees fell 11% to $1.8bn in the quarter. The bank had last month projected a decline of at least 10%, as it wasn't well positioned in some businesses that saw more activity.
Dealmaking also slowed in the reported quarter as a grinding bond market rout and equities volatility weighed on activity.
"There's a period in volatility like that where buyers and sellers just need to readjust valuations and expectations. So that always happens," Borthwick said, referring to the move in interest rates.
Investment banking fees can be lumpy from quarter-to-quarter and are influenced by when deals close. Transaction timing can often move around due to market conditions and regulatory approvals.
"The environment for deal making remains solid. It's a pretty active environment," Borthwick said, adding that BofA's investment banking pipelines are strong.
BofA slipped to fourth place in the global investment banking league table for the first nine months of 2026, from third in the same period a year earlier, Dealogic data showed.
In a bright spot, net interest income (NII) — the difference between what a bank earns on loans and pays out on deposits — jumped 8% in the quarter, driven by higher loan and deposit balances and fixed-rate asset repricing.
BofA expects interest income to improve sequentially in the fourth-quarter. Full-year NII growth is anticipated to be 8% or more in 2027.
ASML
ASML said booming AI demand was driving orders for its chipmaking tools into 2030, with customers seeking more capacity than it can supply next year and through 2028, adding to concerns over supply shortages.
Customers are already discussing orders beyond 2027, with some expressing interest in booking capacity for 2029 and 2030, the Dutch company said on Wednesday.
Demand for the company's machines has been fuelled by the AI boom and the rapid expansion of data centres, with customers including TSMC — which manufactures chips for Nvidia, as well as Samsung and Intel investing heavily to increase chip production. ASML shares have risen nearly 70% this year.
ASML, which leads the market for equipment used to make the most advanced semiconductors, said it was looking at ways to expand capacity further.
In July ASML said it would increase capacity in 2027 by 30% and again by 30% in 2028, but CEO Christophe Fouquet said it was clear that would not be enough.
Fouquet said the company was now seeing "a lot of order intake for 2028. But also some strong interest to already place orders for 2029 and sometimes even 2030."
The company's comments came as it reported quarterly results and an improved sales outlook, prompting the company to lift the bottom end of its full-year sales forecast.
ASML now expects fourth-quarter sales of €14.2bn to €15.2bn ($15.9bn to $17bn), above analyst forecasts, with a gross margin of around 57%. That, in turn, has nudged up its full-year sales forecast to €44bn to €45bn.
Shares in ASML, which has a market value of around €586bn ($657bn), rose nearly 3% in early Amsterdam trading.
Nick Rossolillo of Chip Stock Investor, which holds shares in the company, said he was satisfied with the pace at which ASML is adding capacity "as long as they do gradually expand to take care of customer demand".
"Staying capacity constrained protects the business and gives a bit of cushion for when there are inevitable years of soft customer order activity," he said, pointing to the 2028 to 2029 period after completion of several new customer plants.
ASML's customers also include SK Hynix, Micron and newcomer Elon Musk and his TeraFab, all of which have expansion plans. ASML is "still kicking the tyres on the exact size of that (TeraFab) opportunity”, CFO Roger Dassen said on a call with reporters.
ASML broke ground last month on a major expansion in Eindhoven, Netherlands, but it will need to look at other ways to address capacity before the first phase is completed in 2029.
Dassen said ASML will also address the shortage by upgrading existing tools, and selling new versions of its machines with higher throughput.
Taken together, these measures would provide "a significant enhancement to our customers' capacity", he said, noting that the company will be increasing prices starting in 2027, with the full effect visible from 2028.
ING analyst Marc Hesselink said the earnings beat expectations and he expected consensus earnings forecasts to be revised upward through 2028.
"Management's commentary on demand visibility and capacity... was again very constructive," he said.
For the third quarter, ASML reported net profit of €4.96bn on net sales of €11.7bn, above the €4.05bn and in line with the expectations of analysts polled by LSEG.
