Bank of America (NYSE:BAC), a global consumer and investment bank with diversified deposit, lending, and markets businesses, closed at $53.96, down 1.14%. Investors are waiting for Wednesday’s earnings release, following the announcement of a $1.2 billion fine from the U.S. Treasury Department after hours on Tuesday. Trading volume reached 43.3M shares, coming in about 28% above its three-month average of 33.8M shares.
How the markets moved today
S&P 500 (SNPINDEX:^GSPC) closed at 7,805, down 0.02%, and Nasdaq Composite (NASDAQINDEX:^IXIC) closed at 27,204, down 0.15%. Among money center banking / diversified financial services peers, JPMorgan Chase (NYSE:JPM) closed at $331.43, down 0.86%, while Wells Fargo (NYSE:WFC) closed at $80.75, down 3.08% as big-bank earnings season shaped trading.
What this means for investors
The Treasury Department has hit Bank of America with $1.2 billion in penalties for anti-money-laundering and sanctions law violations. The bank allegedly failed to report over $5 billion in suspicious payments for years.
Though this is the third-largest fine handed out in Treasury history, I don’t think it is necessarily panic-worthy for investors just yet. BAC stock is a $350 billion market cap operation, so the potential penalty isn’t a massive hit to the company. Bank of America’s management said it expects to take a $1.2 billion charge in its Q3 earnings, which will result in a $0.17 decrease in EPS — compared to BAC’s share price around $54.
That said, the compliance costs to keep these types of issues under control will only continue to rise, and Bank of America can’t afford to skimp on this spending, lest it risk being hit with tighter regulatory oversight that could weigh on profitability.
Not great news, obviously, but I’d argue tomorrow’s earnings are likely much more important to long-term investors and Bank of America’s overall investment thesis. Let’s see how things turn out tomorrow and go from there.
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