TLDR
- Bank of America ordered to pay $540.3 million to FDIC for underpaid deposit insurance premiums
- Analysts expect Q1 earnings of $0.82 per share, up 8% year-over-year
- Revenue projected to rise more than 4% to $26.97 billion
- Penalty stems from failure to properly report counterparty risk under 2011 post-crisis rules
- BAC shares down 17% this year through Monday’s close
Bank of America, the second-largest U.S. bank, has been hit with a $540.3 million penalty by the Federal Deposit Insurance Corporation (FDIC) just hours before its scheduled first-quarter earnings release. The ruling settles a legal dispute dating back to 2017, where the bank was accused of underpaying its deposit insurance premiums.
The case centered on BAC’s failure to comply with a 2011 rule established after the 2008 financial crisis. This rule specified how banks should report their risk exposure to other financial institutions.
The FDIC claimed that Bank of America failed to properly account for counterparty risk in its reporting. This error understated the bank’s risk profile and resulted in lower quarterly payments to the Deposit Insurance Fund.
Legal Resolution Before Earnings
While the court dismissed Bank of America’s arguments that the 2011 rule lacked reasonable basis, it also ruled that the FDIC’s lawsuit was filed too late to claim underpayments before the second quarter of 2013.
The $540.3 million payment covers the period from Q2 2013 through the end of 2014. This amount falls well short of the FDIC’s initial claims, which exceeded $1 billion.
Bank of America has already set aside funds to cover the ruling. The company expressed relief that the long-standing dispute has finally been resolved.
Wall Street analysts remain largely positive on BAC stock despite the penalty and recent share price decline. The stock has a “Strong Buy” consensus rating based on 15 Buys and three Holds assigned in the last three months.
The average Bank of America stock price target stands at $50.97, suggesting a potential 39% upside from current levels. BAC shares have fallen 17% this year through Monday’s close.
Q1 Earnings Expectations
Investors are now turning their attention to Bank of America’s first-quarter results, which will be released later today alongside Citigroup’s earnings.
Analysts expect Bank of America to report earnings per share of $0.82, up from $0.76 in the same period last year. Revenue is projected to reach $26.97 billion, compared to $25.8 billion a year ago.
Net interest income, a key metric for banks representing the difference between what they earn on loans and pay on deposits, is expected to hit $14.49 billion. This would mark an increase from $14 billion in Q1 2024.
Bank of America previously guided for net interest income between $14.5 billion and $14.6 billion for the first quarter on a fully taxable equivalent basis. The bank expects this figure to grow to between $15.5 billion and $15.7 billion by the fourth quarter of 2025.
Banking sector observers will be paying close attention to the trading desk results. Market volatility in the first quarter likely boosted trading revenue before President Trump’s tariff announcements sent markets reeling in early April.
This pattern has already been seen at Goldman Sachs, which on Monday reported a 15% jump in profit driven by strong trading performance.
The trading results may help offset what analysts expect to be a lighter quarter for dealmaking. Both BAC and Citigroup should benefit from the sharp rise in market volatility during Q1.
Shareholders will be listening closely to what bank executives say about their outlook for the rest of the year. They’ll want to hear how the Trump administration’s trade policies might affect banking operations, the broader economy, and consumer confidence.
So far this earnings season, other bank CEOs haven’t significantly changed their financial guidance while still acknowledging potential economic risks.
Citigroup, which also reports earnings today, has seen its shares decline 9.6% this year. Citi’s CFO Mark Mason previously indicated that the bank expects net interest incomeâexcluding its markets businessâto rise “modestly” this year.
The $540.3 million FDIC penalty comes at a time when Bank of America is looking to reassure investors about its growth prospects. The legal resolution, while costly, removes one area of uncertainty for the bank.
Bank of America currently trades at a price target suggesting substantial upside potential if the company can deliver on its earnings expectations and navigate ongoing economic uncertainties.
The FDIC ruling covered a specific timeframe from mid-2013 through 2014, with the judge determining that claims for earlier periods were time-barred.
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