Bank of America 10-Qquarter ended 2026-09-30
Impairment / charge
A $1.2B AML and sanctions penalty charge cut earnings despite stronger lending income and wealth fees.
Filed 2026-10-30 17:04 ET
Key figures · Q3 FY2026 · period ended 2026-09-30
- Net revenue$30.0B1YoY +3.2%QoQ −5.1%
How net revenue adds up Net interest income $16,449M + Total noninterest income $13,509M Net revenue $29,958M Lines as the filer presents them on its income statement.
- Net income$6.9BYoY −16.8%QoQ −23.6%
- Total assets$3.4TYoY +0.7%QoQ −2.0%
- Total debt$380.9B2QoQ −4.7%
How total debt adds up Long-term debt (includes $85,033 and $72,591 measured at fair value) $318,687M + Short-term borrowings (includes $14,044 and $8,051 measured at fair value) $62,230M Total debt $380,917M Lines as the filer presents them on its balance sheet.
- Shareholders' equity$296.7BYoY −1.9%QoQ −1.4%
- Tangible book value$225.9B3QoQ −1.9%
Notes (3)
- Net revenue: Net interest income plus non-interest income, as the filer presents them.
- Total debt: Excludes deposits, repurchase agreements, federal funds purchased and securities loaned. Borrowings the company raised to fund itself: long-term and short-term borrowings, FHLB advances, subordinated debt and finance leases.
- Tangible book value: From the notes to the financial statements; the balance sheet does not present this as a separate line.
How this filing reads
- Health+0.3CET1 was 10.9% versus a 10.0% minimum, with a scheduled 50 bp increase ahead.
- Momentum+0.1Q3 revenue rose 3.2%, while net income fell 17% after the $1.2B penalty.
- Outlook−0.2A 50 bp capital requirement increase and $3.2B expected hedge losses may constrain distributions and earnings.
Executive Summary
Bank of America provides banking, lending, wealth management and trading services to consumers, businesses and institutions, earning interest spreads and fees. It is concentrating on deeper client relationships, digital banking, wealth management and corporate financing, supported by continued investment in technology and people. Q3 showed stronger lending income and wealth-management fees, but weaker trading and investment banking slowed growth, while regulatory penalties reduced earnings. The opportunity is to turn its broad customer base into more lending and fee income; the challenge is doing so while compliance obligations and shrinking regulatory capital headroom constrain flexibility.
What's Happening in the Business
The quarter’s defining event was a $1.2B non-tax-deductible charge for regulatory penalties announced on 10/13/2026 concerning anti-money-laundering and sanctions compliance. Required remediation includes historical transaction reviews and improvements to customer due diligence and data governance. Bank of America has added staff and technology resources since late 2023; management does not expect ongoing remediation costs to significantly affect future consolidated expenses.
Growth is increasingly coming from commercial and wealth clients rather than expansion of consumer balances. Commercial loans increased $58.2B, or 8.3%, from year-end, accounting for most loan growth. Global Banking attracted corporate deposits, while wealth lending benefited from custom loans, securities-backed borrowing and mortgages. This expands interest-earning assets but also consumes regulatory capital.
Consumer Banking is emphasizing digital access and investment relationships while optimizing its physical network. Active digital users reached 50.4M, up 2.4% Y/Y, as financial centers declined by 118 to 3,531. Consumer investment assets increased 14% to $664B through market appreciation and positive client flows, creating opportunities beyond traditional deposits and cards.
Key Financial Highlights
| Metric | Q3 2026 | 9M 2026 | Investor interpretation |
|---|---|---|---|
| Revenue | $30.0B; +3.2% Y/Y | $91.8B; +8.3% Y/Y | Weaker trading and investment banking slowed quarterly growth relative to YTD. |
| Net interest income | $16.4B; +8.0% | $48.2B; +8.7% | Lower funding costs, balance growth and fixed-asset repricing outweighed lower asset yields. |
| Noninterest expense | $19.7B; +14% | $56.9B; +8.8% | Regulatory penalties compounded technology, staffing and revenue-related spending. |
| Net income | $6.93B; −17% | $24.6B; +7.6% | The penalty reduced pretax earnings without a tax deduction, raising the effective tax rate. |
| Diluted EPS | $0.91; −13% | $3.23; +14% | Fewer diluted shares cushioned the quarterly earnings decline and amplified YTD growth. |
Segment revenue is fully taxable-equivalent: tax-exempt income is grossed up, adding $161M to Q3 GAAP revenue.
| Segment | Q3 revenue; Y/Y | Q3 net income; Y/Y |
|---|---|---|
| Consumer Banking | $11.6B; +3.6% | $3.52B; +2.4% |
| Global Wealth & Investment Management | $7.12B; +13% | $1.54B; +22% |
| Global Banking | $6.21B; broadly flat | $1.99B; −4.6% |
| Global Markets | $5.87B; −5.8% | $1.24B; −25% |
- Wealth fees: Asset-management fees reached $4.55B, +16%, supported by valuations and client flows; higher fees more than covered increased incentive compensation.
- Markets and corporate fees: Fixed-income, currency and commodity trading revenue fell 17% to $2.57B, while equities increased 11% to $2.51B through client financing. Corporation-wide investment banking fees fell 11% to $1.80B, reversing the stronger YTD trend.
- Consumer economics: Deposit spreads widened 19 bp despite broadly flat average deposits. Credit-card purchase volume rose 6.1%, but card income fell 5.1%, showing that spending growth did not translate into stronger fee income.
- Credit: Q3 net charge-offs were $1.35B, with the annualized loss rate improving to 0.44% from 0.47%; lower commercial losses offset higher consumer losses.
- Unallocated costs: All Other’s net loss widened to $1.35B from $103M, principally reflecting the regulatory charge, explaining why segment profits exceed consolidated earnings.
- Capital returns: Q3 repurchases were $6.0B and common dividends paid were $2.2B. Across 9M, repurchases totaled $19.3B, and shares outstanding declined 4.0% net of issuance.
Risk Assessment
- Compliance execution: Continuing consent-order requirements expose the bank to further enforcement, remediation demands and reputational damage despite the recorded penalties.
- Capital headroom: The standardized common equity tier 1 ratio fell to 10.9% from 11.4% at year-end against a 10.0% minimum; a scheduled 50 bp requirement increase on 1/1/2027 could constrain distributions or growth.
- Interest rates and securities: Held-to-maturity gross unrealized losses widened 29% to $104B, largely in agency mortgage-backed securities; these are not current earnings losses, but reduce flexibility, while cash-flow hedge losses are expected to reduce pretax earnings by $3.2B over the next year.
- Borrower stress: Commercial real estate improved, but 9M commercial and industrial charge-offs rose 43% to $488M, exposing a growing commercial book to inflation and geopolitical stress.
A 10-Q does not have to restate the risk factors in the annual report. Full list: the company's 10-Ks on SEC.
What to Watch
- Wealth relationships: Assets-under-management net flows were $20.0B vs $23.5B a year earlier; sustained inflows would support fees beyond market appreciation, while further slowing would weaken that growth engine.
- Trading recovery: Global Markets’ quarterly contraction contrasts with 12% YTD revenue growth; recovery in fixed-income trading alongside continued equities financing would validate investment in the business.
- Lending income: Watch whether funding savings and asset repricing continue to offset lower yields and scheduled hedge-loss recognition; otherwise net interest income growth could slow.
- Capital allocation: Watch whether earnings rebuild capital headroom before the higher requirement takes effect; continued ratio erosion would put buybacks and balance-sheet expansion in competition.
Longer version: the summary of each of the report's 39 sections, written by an AI model from the same filing.
Changes since the previous 10-Q
- Risk materialized Compliance enforcement
Consent-order remediation continued; penalties or additional remediation could add costs. → AML and sanctions enforcement produced a $1.2B nondeductible charge and additional remediation requirements. - Risk escalated Regulatory capital headroom
CET1 fell to 11.2%, with the 2027 surcharge threatening growth and distributions. → CET1 fell further to 10.9%; requirements rise 50 basis points in January. - Watch item improved Wealth client inflows
Quarterly net flows were $13.7B; sustained inflows would demonstrate franchise growth beyond market gains. → Quarterly net flows increased to $20.0B, although below $23.5B a year earlier. - Risk escalated Held-to-maturity securities exposure
Held-to-maturity securities carried $82.1B of gross unrealized losses. → Gross unrealized losses widened to $104B, further limiting flexibility without reducing current earnings.
Figures are computed from the filing's XBRL data; the summary and scores are written by an AI model reading the filing.
Model 006 · prompt v163 · 2026-10-30 22:34:55Z