Bank of America's (BAC) stock dropped 6% Wednesday, as a $1.2 billion regulatory penalty dragged down the major lender's third quarter results. The stock is on pace for its worst single-day drop since April 2025.

The nation's second biggest bank reported third quarter net income of $6.93 billion, or $0.91 per share, compared with the $1.10 per share analysts expected. Excluding the regulatory penalty, Bank of America said it earned $8.1 billion, or $1.08 per share.

Revenue rose 3% to $30 billion, compared with expectations of roughly $30.6 billion. The earnings miss came after regulators charged the bank $1.2 billion in fines late Tuesday over widespread failures in the banking giant's safeguards against money laundering and other illicit financial activity, issues that previously prompted an enforcement action in 2024.

FILE PHOTO: Bank of America's logo appears in this illustration created on December 1, 2025. REUTERS/Dado Ruvic/Illustration/File Photo · Reuters / REUTERS

On a call with analysts Wednesday, CEO Brian Moynihan said the bank spent more than $200 million on remediation efforts during the quarter and has assigned thousands of employees to the work.

"We have a clear understanding of what we need to do. We're doing it. We'll complete it. And it is the focus of management to get it cleaned up," Moynihan said.

The bank said there is no growth restriction tied to the consent order but declined to estimate when the cleanup would be completed. Such regulatory resolution efforts can take years.

Beyond the penalty, some of Bank of America's Wall Street businesses lost momentum during the quarter even as its core lending income grew.

Investment banking fees fell 11% from a year earlier to $1.8 billion while still surpassing analyst forecasts. Meanwhile, Fixed income trading revenue fell 17% from a year ago to $2.6 billion, offsetting an 11% increase in equities trading revenue to $2.5 billion.

Bank of America CFO Alastair Borthwick attributed the lower fixed income trading revenue to the quarter's sharp rise in interest rates softening activity in its credit, mortgage and municipal bond businesses.

"Clients tend to slow their activity. It's not good for asset prices," Borthwick said.

However, Bank of America's net interest income, a core measure for what it earns from lending, rose 8% from a year earlier to $16.4 billion, supported by higher loan and deposit balances.

David Hollerith covers a range of developments throughout the financial sector, from Wall Street to banking and asset management to crypto and fintech. Email him at david.hollerith@yahoofinance.com. Follow him on X at @DsHollers.

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