Bank of America has been fined US$1.21 billion by US regulators for widespread failures to detect potential money laundering and other illicit activity, a penalty the bank said will hurt third-quarter earnings. The US Treasury Department said the fine, the third-largest in department history, is due to the bank's failure to report more than US$5 billion in suspicious activity to the government, including US$1 billion that posed national security-related and other priority illicit finance risks. "Financial institutions are on the front lines of protecting our economic and national security," Treasury Secretary Scott Bessent said in a statement. "When a bank of this size fails to meet its anti-money laundering and sanctions obligations, the consequences extend far beyond its own walls, exposing the entire US financial system to significant illicit finance risks." The Treasury said the bank "prioritised its revenues" in building compliance programmes, and overly relied on inquiries from outside parties like law enforcement and other financial institutions instead of its own internal controls. The consent order requires Bank of America to hire an independent third party to review past transactions, identify suspicious activity that the bank failed to detect at the time, and report those transactions to FinCEN. "Financial crime compliance is serious, and we are responsible for getting it right," said a Bank of America spokesperson in a statement. "We have invested billions of dollars in technology and dedicated thousands of employees to combat financial crime, and our team is far along with and committed to completing the work required to address the issues raised by our regulators." The spokesperson added that the bank's third-quarter results due for release on Wednesday will include a non-tax-deductible charge of US$1.2 billion, which will reduce quarterly net income by approximately 17 cents a share. Shares were down 2.7 percent in after-hours trading after closing the day down 1.1 percent. The penalty is likely to add to negative investor sentiment and raise concerns about higher expenses and whether Bank of America can maintain its roughly US$6 billion quarterly share buyback pace, UBS analyst Erika Najarian said in a note. With earnings due on Wednesday, "we think shares likely underperforming at open," she said. She noted there was no asset cap, a regulatory penalty that would limit how large the bank could grow. As part of the fine, the Office of the Comptroller of the Currency levied a US$750 million civil penalty against the lender, the largest ever for the regulator, citing failures to address shortcomings in its anti-money laundering programs that were identified as part of a 2024 cease-and-desist order from the watchdog. The regulator said the bank's compliance program was "deficient and ineffective," and its transaction monitoring system caused the bank to delay filing suspicious activity reports on billions of dollars of transactions. In addition, the bank paid an US$11.6 million fine to the Office of Foreign Assets Control for over 400 apparent violations of numerous sanctions programmes. The Treasury said the bank mistakenly processed millions of dollars in payments that violated sanctions programmes targeting countries including Russia and Iran. The fine comes days after American Express was also hit with a US$350 million penalty for similar anti-money laundering shortcomings. (Reuters) Edited by Cecil Wong

Major US banks reported solid loan and deposit growth in the third quarter, but lenders are paying a premium to retain customer funds in a fiercely competitive, high-interest-rate environment. JPMorgan Chase, Citigroup and Wells Fargo all posted higher net interest incomes on Tuesday, defying concerns that soaring bond yields and elevated borrowing costs would stifle loan demand and trigger a flight in deposits. "The consumer remains one of the economy's most important sources of resilience though higher prices continue to weigh on consumer sentiment," a Wells Fargo executive said in a post-earnings call. Citigroup reported an 11 percent increase in average deposits and a 12 percent jump in average loans. Wells Fargo saw average deposits rise 10.7 percent, alongside an 11 percent jump in average loans buoyed by its consumer banking division. Meanwhile, JPMorgan, the largest US lender, reported a 4 percent rise in average deposits and a 2 percent increase in loans from a year ago. Despite resilient metrics, banks face mounting funding pressures. As US Treasury yields hit record highs in the third quarter, customers sought better returns elsewhere, forcing lenders to raise deposit rates to prevent outflows and squeezing their margins. This was exemplified by JPMorgan's deposit margin that fell to 2.78 percent in the third quarter from 2.79 percent in the year ago period and Wells Fargo's net interest margin on a taxable basis that slumped to 2.43 percent in the reported quarter from 2.61 percent in the year earlier. "Loan and deposit growth continue to chug along, albeit maybe with some concern on deposits and how much is left over for the rest of the reporters," said Truist analyst Brian Foran. So far, analysts said there have been no significant cracks in overall bank credit quality, suggesting households have continued to manage their debt obligations. A weakening labour market and rising living costs could pressure borrowers, especially if prolonged conflicts drive up prices for essential goods and squeeze discretionary spending. Despite concerns that rising consumer spending is merely a reflection of inflation crowding out non-essential purchases, internal data does not show consumers shifting away from discretionary items, JPMorgan CFO Jeremy Barnum said in a post-earnings call. US consumer prices rose 3.4 percent in the 12 months through August, matching July's increase, while a key measure of underlying inflation posted its largest monthly gain in four months. Meanwhile, US job growth slowed more than expected in September. Sharp downward revisions to payrolls in previous months also added to uncertainty about the economic outlook and the potential strength of future loan demand. Wells Fargo and Citigroup increased their provision for credit losses in the third quarter, a trend the other banks might soon follow in the current macroeconomic landscape. In September, major US banks raised their prime lending rate following the Federal Reserve rate hike that raised borrowing costs for consumers and businesses. (Reuters) Edited by Cecil Wong

Sluggish consumer demand in China has pushed many companies, such as electric car brands, to accelerate plans for entering other countries.

Wall Street stocks were finished lower on Tuesday, as chip stocks added to recent losses and investors parsed mixed quarterly results from Citigroup and other big US banks. The PHLX chip index fell 0.2 percent, down for a fifth straight session, after Broadcom CEO Hock Tan on Monday likened some of the investment flow into the sector to "casino gambling." Micron Technology lost 3.6 percent and Applied Materials dropped almost 7 percent. Broadcom rose 0.7 percent. Citigroup dipped 5.6 percent and Goldman Sachs lost 0.2 percent after both banks topped profit estimates. Wells Fargo fell 3.1 percent after its net interest income missed estimates, while JPMorgan Chase ended down 0.9 percent following a rare profit miss. Apple hit an intraday record high of US$348.15 before closing up 0.1 percent at US$341.27, putting its stock market value at US$4.98 trillion. Analysts on average see S&P 500 third-quarter earnings surging over 30 percent, fueled largely by AI-related technology companies, according to LSEG data. Expectations of a strong earnings season have offset worries about the US war with Iran, surging bond yields and inflation related to high oil prices. "A lot of investors are feeling a sense of relief that markets might start looking at earnings and less at the bond market, less at higher-for-longer oil prices and less at high interest rates," said Jake Dollarhide, CEO of Longbow Asset Management in Tulsa, Oklahoma. The S&P 500 declined 0.02 percent to end the session at 7,805 points. The Nasdaq declined 0.2 percent to 27,204 points, while the Dow Jones Industrial Average declined 0.4 percent to 51,670. (Reuters) Edited by Cecil Wong