Bank of America Q3 2026 Earnings: Core Banking Growth Offsets Regulatory Charge and Weaker Markets

Bank of America reported third-quarter revenue of $30.0B, up 3% year over year, while GAAP diluted EPS fell to $0.91 from $1.04. Results included a $1.2B non-tax-deductible regulatory settlement charge tied to Bank Secrecy Act, anti-money-laundering and economic-sanctions compliance orders; excluding that item, adjusted EPS was $1.08.

The quarter was stronger in the core banking franchise than the GAAP headline suggests. Higher net interest income, broad commercial loan growth, improving consumer credit trends and wealth-management flows supported results, but weaker investment banking and fixed-income trading revenue, along with the regulatory charge, weighed on reported profitability.

Earnings Snapshot

\*Adjusted results exclude the $1.2B regulatory settlement charge and are non-GAAP measures.

The Bigger Story

The central development was Bank of America’s continued improvement in net interest income and balance-sheet efficiency, even as its markets businesses faced a difficult fixed-income trading environment.

NII rose 8% to $16.4B, while net interest yield increased to 2.16% from 2.01% a year earlier. Higher loan and deposit balances, repricing of fixed-rate assets and Global Markets activity drove the improvement. Management said the bank continues to move toward its 2.3% medium-term net interest yield target.

That progress matters because NII is a large, recurring earnings driver for Bank of America. The company expects NII to rise sequentially in the fourth quarter and projects full-year 2027 NII growth of at least 8%, assuming modest loan and deposit growth, continued fixed-rate asset repricing and three additional 25-basis-point rate increases through June 2027.

The offset is that the quarter exposed the sensitivity of Global Markets to customer activity in rate-sensitive products. A sharp move in rates reduced activity in mortgage, municipal and credit markets, contributing to a 17% decline in FICC revenue. The regulatory settlement also reinforces that compliance remediation remains an important execution issue, even if management says the ongoing costs are now embedded in its expense base.

Revenue and Operating Performance

Revenue growth was led by consumer banking, wealth management and commercial lending activity.

Consumer Banking revenue increased 4% to $11.6B, primarily from higher NII. Net income rose 2% to $3.5B. Average credit card balances increased 5% to $105.8B, while combined credit and debit card spending rose 8% to $265.7B. The company added more than 200,000 net new consumer checking accounts during the quarter, extending its streak of quarterly net checking-account growth to 31 quarters.

Consumer deposits were broadly stable at $948.6B on an average basis, while average consumer loans and leases were also essentially flat at $321.0B. Consumer investment assets rose 14% to $664.4B, helped by market appreciation and $18B of net client flows over the past year.

Global Wealth and Investment Management produced the strongest segment-level growth. Revenue rose 13% to $7.1B and net income increased 22% to $1.5B. Asset-management fees climbed 16% to $4.5B, supported by higher market values, net asset flows and higher NII. Client balances reached $5.1T, up 9%, and assets under management rose 12% to $2.4T.

The wealth business also continued to generate lending growth. Average loans rose 13% to $278.6B, while management said securities-based lending, custom lending and mortgages were key contributors. Quarterly AUM flows were $20B, and the company added roughly 5,000 net new relationships with at least $500,000 in assets across Merrill and the Private Bank.

Global Banking was more mixed. Revenue was essentially flat at $6.2B, as higher NII and treasury-services revenue offset lower investment banking fees. Average loans increased 8% to $418.9B and average deposits rose 6% to $668.6B. Treasury-services revenue increased 10%, reflecting greater client use of cash-management and payments services.

Investment banking was the weak point within Global Banking. Total corporate investment banking fees, excluding self-led transactions, declined 11% to $1.8B, as advisory and debt-underwriting activity fell from a strong prior-year quarter. Management said pipelines remain healthy, but the reported quarter showed that deal activity remains uneven.

Global Markets revenue fell 6% to $5.9B, and net income declined to $1.2B from $1.6B a year earlier. Sales and trading revenue decreased 5% to $5.1B. Equities revenue rose 11% to $2.5B, driven by client financing activity, particularly in Asia and the U.S., but FICC revenue declined 17% to $2.6B.

Management attributed the FICC decline primarily to lower client activity in mortgages, municipals and credit after substantial interest-rate moves during the quarter. That pressure more than offset growth in foreign exchange and commodities activity.

Profitability and Margins

The $1.2B regulatory settlement charge was the largest driver of the decline in reported earnings. The charge was non-tax-deductible, reducing reported EPS by $0.17.

On a GAAP basis, noninterest expense increased $2.4B year over year to $19.7B, lifting the efficiency ratio to 66% from 60%. Excluding the settlement, adjusted noninterest expense was $18.5B and the adjusted efficiency ratio was 62%.

Even excluding the charge, expenses remained elevated. Management cited revenue-related compensation costs in wealth management, brokerage clearing and exchange costs in equities, as well as continued spending on technology, AI, marketing, client acquisition and franchise growth.

The bank’s adjusted expense base increased less dramatically than reported costs suggest, but expense discipline remains an important investment question. Management said it expects to return to positive operating leverage in the fourth quarter and continues to target 200 to 300 basis points of operating leverage over the medium term.

Wealth management provided the clearest example of operating leverage in the quarter. Its pretax margin improved to 29% from 27% a year ago as revenue grew faster than expenses. In contrast, Global Markets’ efficiency ratio rose to 72% from 63%, reflecting lower revenue combined with higher transaction costs and continued investment.

Demand, Customers and Pricing

Client activity remained constructive across the company’s consumer, wealth and commercial businesses.

Management said consumer money movement was up 5% year to date, while spending trends remained resilient despite higher gasoline costs. Consumer credit trends also improved: the credit card charge-off rate fell to 3.22% from 3.46% a year earlier, and both early- and late-stage card delinquency rates improved year over year for the sixth consecutive quarter.

Commercial lending grew across every client segment. Average commercial loans increased 8%, with growth in small business, business banking, global commercial banking and global corporate lending. Management highlighted particularly strong lending in real estate, sports, technology, healthcare and biopharmaceuticals.

Deposit growth was more modest but remained important to the funding story. Average deposits increased 2% to $2.02T, while ending deposits rose to $2.04T. Management said more than 75% of year-over-year deposit growth came from noninterest-bearing balances, and the total deposit rate increased only 3 basis points sequentially to 1.49%.

That pricing discipline supports NII expansion. However, management’s outlook assumes continued deposit growth without a material increase in competitive deposit pricing, an assumption investors should continue to test if loan growth accelerates across the banking industry.

What is Bank of America’s outlook for Q4 2026 and 2027?

Bank of America did not provide formal revenue or EPS guidance. Management said it expects NII to increase sequentially in the fourth quarter and expects full-year 2026 NII growth of approximately 8%.

For 2027, management expects NII growth of 8% or more, above its 2026 growth rate and its prior medium-term target of 5% to 7%. The outlook assumes modest loan and deposit growth, continued repricing of fixed-rate assets, and three 25-basis-point interest-rate increases through June 2027.

Management also expects to resume positive operating leverage in the fourth quarter. It reaffirmed its medium-term target of 200 to 300 basis points of operating leverage, while noting it may provide more specific 2027 expense guidance with fourth-quarter results.

The 2027 NII outlook incorporates an expected drag from Global Markets, which management described as liability-sensitive in a rising-rate environment. As a result, the implied growth rate in the core banking book would be higher than the consolidated NII outlook if markets-related NII declines.

Balance Sheet, Cash Flow and Capital

Average loans and leases increased 6% year over year to $1.23T, while ending loans reached $1.25T, up $34B sequentially. This marked the company’s 10th consecutive quarter of sequential average loan growth.

The bank funded loan growth partly by reducing securities balances and short-term wholesale funding. Ending debt securities declined to $842.0B from $869.2B at the end of the second quarter, while long-term debt declined to $318.7B from $339.9B.

Capital remained above regulatory requirements, though it declined during the quarter. The standardized CET1 ratio fell to 10.9% from 11.2% sequentially, reflecting loan growth, a $3.2B reduction in CET1 capital, capital distributions and the effect of higher rates on accumulated other comprehensive income.

Bank of America returned $8.3B to shareholders during the quarter, including $2.2B in common dividends and $6.0B in share repurchases. Common shares outstanding fell to 6.92 billion from 7.33 billion a year earlier.

Management said capital allocation priorities remain unchanged: support client growth, maintain regulatory capital and fund the dividend before returning excess capital through buybacks. The pace of future repurchases will also depend on final regulatory capital rules and transition requirements.

Credit quality remained favorable. The net charge-off ratio declined to 0.44% from 0.47% in both the prior-year and prior quarters. Nonperforming loans and leases fell sequentially to $5.5B, while commercial criticized utilized exposure declined to $19.9B, down $6.4B from a year earlier.

What Investors Should Watch

1. Net Interest Income and Deposit Pricing

Management expects at least 8% NII growth in 2027. Investors should watch whether noninterest-bearing deposits continue to grow and whether the 1.49% total deposit rate remains contained as loan demand and competition for deposits evolve.

2. Expense Control After the Regulatory Settlement

The settlement charge is non-recurring, but compliance remediation, technology investment and revenue-related compensation remain part of the ongoing expense base. Positive operating leverage in the fourth quarter would be an early test of management’s expense-control narrative.

3. Investment Banking and FICC Recovery

Investment banking fees fell 11% and FICC revenue declined 17%. Healthier advisory, debt underwriting and rate-sensitive trading activity would improve revenue diversification, while another weak quarter would increase reliance on NII and wealth-management fees.

4. Loan Growth and Credit Performance

Commercial loans grew across every business line and card balances increased 5%. Investors should monitor whether this growth persists without a deterioration in charge-offs, delinquencies or commercial criticized assets.

5. Capital Rules and Share Repurchases

The CET1 ratio of 10.9% remains above the regulatory minimum, but it declined during the quarter. Final capital-rule changes and their transition terms will shape the company’s flexibility to sustain large buybacks while supporting loan growth.

AlgovestIQ Takeaway

Bank of America’s third quarter showed continued improvement in its core earnings engine. NII growth, wider net interest yield, broad-based commercial lending and strong wealth-management flows more than offset weaker investment banking and trading revenue at the top-line level.

The regulatory settlement distorted the GAAP results, but it also puts attention on the operational issue behind the charge. Management says remediation resources and ongoing costs are already embedded in the expense base, and that the consent orders do not impose an asset cap or constrain customer activity. The proof point will be whether expenses normalize while the company completes its compliance work.

The outlook has improved meaningfully for NII. Management’s forecast of at least 8% growth in 2027 suggests confidence that deposit growth, fixed-rate asset repricing and loan expansion can continue to lift earnings even if Global Markets NII becomes a headwind in a higher-rate environment.

The main unresolved question is whether Bank of America can convert that NII momentum into sustained operating leverage. Stronger fee revenue from wealth management and a recovery in capital-markets activity would help. Conversely, persistent weakness in FICC and investment banking, higher deposit costs, or compliance-related expense pressure would limit the earnings benefit from the improving balance sheet.