Net income at Bank of America was hit by a large legal settlement concerning mortgages in the US, while its wealth management unit reported record earnings and revenues.

Net income at Bank of America plummeted to $168 million for the third quarter of 2014 from $2.5 billion a year ago, due primarily to a significant mortgage settlement with the US government.

The decline was not, however, as bad as some Wall Street analysts had expected, reports say.

A number of US banks, such as Citigroup, JP Morgan and Wells Fargo, have reported results so far this week, most of them showing robust figures in the wealth management area. (Further details below.)

After deducting dividends on preferred shares, the company today reported a loss of $0.01 per share. The results include the previously-announced pre-tax charge of $5.3 billion for the settlement with the Department of Justice, certain federal agencies and six states (DoJ Settlement), which impacted earnings per share by $0.43. Earnings in the year-ago period were $2.5 billion or $0.20 per diluted share.

In August, BoA agreed to pay a record fine of $16.65 billion over its failure to disclose the risk to customers of its mortgage-backed securities in the run up to the financial crisis in 2008.

BoA's third quarter revenue, net of interest expense on an FTE basis, declined 1 per cent from the third quarter of 2013 to $21.4 billion. Excluding equity investment gains ($9 million in Q3 2014 and $1.2 billion in Q3 2013) and valuation adjustments related to changes in the company's credit spreads, revenue inched up 1 per cent from the year-ago quarter to $21.2 billion from $21.0 billion.

“We saw solid customer and client activity and improved profitability in most of our businesses relative to the year-ago quarter,” said chief executive Brian Moynihan. “We remain focused on streamlining and simplifying our company and connecting customers and clients with the real economy, an approach that is paying dividends for them and for our shareholders.”

“We continued to focus on optimizing the balance sheet this quarter so we can best serve the core financial needs of our customers and clients and still be in a position to meet new capital and liquidity requirements in an evolving regulatory framework,” added chief financial officer Bruce Thompson.

Global wealth and investment management
Bank of America's global wealth and investment management unit on the other hand reported record revenue and earnings, it said.

Notably, the GWIM percentage of BoA Corporation revenue increased to 22 per cent in Q3 2014 from 13.5 per cent in the third quarter of 2009, which demonstrated the “growth of wealth management business as important part of the company,” it said.

Third quarter net income in this segment was $813 million, up 13 per cent from $720 million a year ago and up from $726 million in the previous quarter. This division logged $4.7 billion in revenue, up 6 per cent.

GWIM client balances of $2.46 trillion were up $179 billion year-on-year, or 7.8 per cent.

Meanwhile, Merrill Lynch Wealth Management “continued to build its business,” BoA said, through a goals-based approach, focusing on clients’ concerns and life priorities.

Merrill Lynch client balances of $2 trillion are $150 billion higher than Q3 2013, which the firm said was driven by market and long-term AuM flows.

Asset management fees of $1.5 billion, meanwhile, are up 16.6 per cent higher than prior year and a “post-merger record,” it said.

The move comes more than a year after Bank of America sold its non-US wealth arm to Switzerland's Julius Baer. As a result, BoA's wealth business is overwhelmingly a domestic business in North America.