Bank of America earnings missed on both lines this morning, and the entire gap is a penalty the bank disclosed the day before. Third-quarter net income came in at $6.9 billion, or $0.91 a share, against $8.3 billion and $1.04 a year earlier, with revenue of $30.0 billion up 3%.
Strip out the $1.2 billion regulatory settlement charge and Bank of America earnings were $1.08 a share on adjusted net income of $8.1 billion, just under the $1.11 consensus 24/7 Wall St. cited going in. Morgan Stanley reported 45 minutes later with $3.03 a share on $20.34 billion, clearing the $2.91 LSEG estimate CNBC carried. Both stocks fell anyway.
The $1.2 Billion Penalty Turned a $1.08 Quarter Into a $0.91 One
The charge defining these Bank of America earnings is non-tax-deductible, which is why it costs the full $0.17 a share. Treasury announced the resolution on 13 October, with FinCEN imposing $1.2 billion, the OCC adding a $750 million civil money penalty it called its largest ever, and OFAC settling 475 apparent sanctions violations for $11.6 million. The FinCEN figure includes credit for the OCC fine, taking the total past $1.21 billion.
The Bank of America earnings release absorbs an admission of willful Bank Secrecy Act violations in the FinCEN resolution, including a failure to timely report more than $5 billion in suspicious transactions. Treasury Secretary Scott Bessent said “even the biggest financial institutions are not above the law.” The bank answered that “financial crime compliance is serious, and we are responsible for getting it right,” and Brian Moynihan told analysts his team is far along with the work regulators require. This is the second time in a month the stock has been hit by something said in public, after a fee warning in September knocked 5.1% off the shares.
Net Interest Income Rose 8% and Loans Grew for a Tenth Straight Quarter
Underneath the penalty, Bank of America earnings on an operating basis were the quarter the Street had expected. Net interest income reached $16.4 billion, $16.6 billion on a fully taxable-equivalent basis, up 8%, with net interest yield at 2.16% and 15 basis points higher. Average loans and leases of $1.23 trillion grew 6%, a tenth consecutive quarter of sequential growth with every segment contributing, and average deposits of $2.02 trillion rose 2%. Asset management fees climbed 17%, and the bank returned $8.3 billion to shareholders through dividends and buybacks.
The penalty is the whole of the miss in these Bank of America earnings, because the franchise beneath it grew in each of the past five quarters. Source: Bank of America 3Q26 earnings release · Chart: FinanceFeedsThe rate disclosure is where Bank of America earnings get interesting for the quarters ahead. On conditions as of 30 September, the bank says a 100 basis point upward shift in the forward curve adds roughly $1.4 billion to net interest income over twelve months, while a 100 basis point fall takes out about $1.9 billion. That asymmetry matters now that the Fed has started raising again, lifting its target range to 3.75% to 4.00% in September, its first increase since 2023. Credit held up alongside it, with provisions of $1.3 billion flat on the year and net charge-offs down to $1.3 billion.
Investor Takeaway
Bank of America earnings of $0.91 against $1.08 adjusted means the reported miss is a one-off legal cost rather than an operating deterioration, with net interest income up 8% and loans growing for a tenth straight quarter.
Morgan Stanley Took In $232.4 Billion of Net New Assets and Held Its Margin at 30.4%
The wealth number the Street watches, reported 45 minutes after the Bank of America earnings, came in ahead of the setup. Morgan Stanley’s wealth division posted record net revenues of $9.065 billion and net new assets of $232.4 billion, well clear of the $148.1 billion record it set in the second quarter, with fee-based flows of $80.5 billion. The pre-tax margin finished at 30.4%, within a rounding error of where it sat three months ago, so the asset gathering arrived without the margin widening to match it.
Equities trading carried the rest, with revenue up 41% to $5.80 billion and Asia singled out for strength, beating the StreetAccount estimate by around $909 million. Fixed income fell 7% to $2.01 billion and investment banking rose 2% to $2.16 billion, both short of expectations. The firm took a $148 million credit provision against nothing a year earlier, including $105 million of charge-offs on corporate and commercial real estate loans. Return on tangible common equity was 22.6%, and the bank that just set the first quarter of 2027 for tokenized equities repurchased $1.5 billion of its own stock.
Bank of America Earnings Landed in a Week Where Beats Stopped Paying
Neither set of numbers was rewarded, and the selling started well before the opening bell. Bank of America was down about 4.7% by 8:40am ET, and Morgan Stanley, which CNBC had reported as off less than 1% at 7:16am, was at $182.02 in the premarket by 8:51am, roughly 2.5% below Tuesday’s $186.64 close.
BAC has given up 12.0% over three months, so Wednesday’s drop extends a de-rating that began well before the penalty. Source: TradingView MS has fallen 16.2% over the same three months despite a record wealth quarter, the steeper decline of the two. Source: TradingViewDay one of the week had already set the pattern for how these results would be received. JPMorgan missed at $5.57 against $5.93 on revenue of $50.2 billion, Goldman Sachs delivered $17.01, Citigroup posted $2.85, and Wells Fargo squeaked past at $1.87 on revenue of $21.87 billion that missed by more than $400 million. Trading desks did the work at all six banks, and the market sold the results regardless, Bank of America earnings included.
Investor Takeaway
Bank of America earnings falling 4.7% on a one-off charge, while Morgan Stanley dropped 2.5% on a beat, shows a market unwilling to pay for bank results in a rising rate environment.